RBI Governor Shaktikanta Das said, ‘The worst of inflation is behind us’
Reserve Bank Governor Shaktikanta Das on Friday said that despite several shocks to the global economy from the pandemic, Ukraine war and tightening monetary policy across the world, the domestic economy and financial sector are stable and the worst of inflation is behind us.
He also said that despite the huge appreciation of the greenback, the rupee has displayed the least volatility among its peer currencies.
Delivering the 17th KP Hormis (Founder of the Federal Bank) Memorial Lecture in Kochi this evening, Das underlined that despite extreme concerns about an impending global recession a few months back, the global economy has shown greater resilience, avoiding a hard landing probability has decreased.
The governor said that there is a declining trend in the global growth rate. There is also considerable uncertainty about structural changes in the drivers of inflation, from labor market dynamics to the concentration of market power and less efficient supply chains.
However, the reassuring aspects are that global food, energy and other commodity prices have softened from the respective peaks and supply chains are normalising, which should help in achieving deflation and thus contain imported inflation, they said. Said.
Speaking on India’s role in helping address several looming crises as it takes on the G20 presidency, he said this global role comes in an environment of formidable geo-economic changes for the country, which has changed the global macro The financial outlook has deteriorated.
The capacity of the existing global economic system to manage the severe impact of multiple shocks is under challenge, leading to severe supply-demand imbalances in key sectors and high inflation in almost all countries.
One such major challenge is fighting the globalization of inflation– which has risen to a multi-decade high amid a slowdown in global growth. This has presented complex policy challenges.
As the premier forum for promoting cooperative and effective solutions to global problems, the G20 is out of work, given the difficulties in building consensus and the uncertainty around outlook on geopolitics, they said and underlined that The ongoing global crisis is both an opportunity and a major test for the G20, which represents 85 percent of world GDP and 75 percent of global trade.
Quoting the IMF, he said that geopolitics with the Ukraine war has now been replaced by geoeconomics and because of this, the global economy is now in a process of geoeconomic fragmentation through five major channels of trade, technology, capital flows. is facing. Labor mobility and global governance.
He said that among the many risks facing the world community, rising inflation poses a complex monetary policy dilemma in every economy, which is difficult to raise interest rates enough to tame inflation and, at the same time, make a hard landing. Evolution is between minimizing the sacrifices in order to survive. ,
On the impact of the dollar rising against countries with high foreign debt, he called on the G-20 countries to support those countries so that there is no chance of another global crisis due to it.
He also urged the grouping of the world’s 20 largest economies to ensure that more vulnerable countries receive timely and adequate climate finance.
They noted that aggressive and simultaneous monetary policy tightening by systemic central banks from early 2022 and the resulting dollar appreciation have made many economies, with high shares of external debt, highly vulnerable to debt distress.
Citing IMF data, he said, 15 per cent of low-income countries are already in debt distress, with an additional 45 per cent at high risk of debt distress. About 25 percent of EMs are also at high risk.
However, the Governor said that there is nothing to worry us on this front, as our external debt is minimal for our balance sheet and economic growth rate.
The rise of the dollar has led to massive capital outflows, resulting in reserve losses, sharp currency depreciation and increased imported inflationary pressures. In such a situation, addressing the deteriorating debt situation in low- and middle-income countries and facilitating coordinated debt treatment by official bilateral and private creditors under a multilateral framework should be considered a priority for the G20, he said.
In short, Das said that our G20 presidency should focus on financial inclusion, digital public infrastructure for climate change and mitigation to achieve a more inclusive global economic order.
G20 countries have a great responsibility in providing leadership for global action on climate change and the provision of climate finance, as well as the transfer of technology to take this agenda forward.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)