Worst Of Inflation Is Behind Us: RBI Chief

RBI Governor Shaktikanta Das said that global growth is trending downward.


Reserve Bank Governor Shakti Kanta Das said on Friday that despite the global economy being hit by the pandemic, the war in Ukraine and monetary policy tightening across the globe, the domestic economy and financial sector are stable and inflation is the worst in our history. is behind

He also said that despite the strong appreciation of the greenback, the rupee has shown the least volatility among its peer currencies.

Delivering the 17th KP Horms (Federal Bank founder) memorial lecture in Kochi this evening, Das emphasized that despite the strong fears of a global recession a few months ago, the global economy has shown greater resilience. has been shown, reducing the chances of a hard landing.

The governor said that the global growth rate is declining. There is also considerable uncertainty about structural changes in the drivers of inflation, from labor market dynamics to concentrations of market power and less efficient supply chains.

However, the reassuring aspects are that global food, energy and other commodity prices have softened from their respective peaks and supply chains are normalizing, which should help contain disinflation and thus imports. Inflation should be controlled.

Discussing India’s role in navigating the many emerging crises as it assumes the presidency of the G20, he said this global role comes in an environment of tremendous geo-economic changes for the country, which has led to global macro The financial outlook has deteriorated.

The capacity of the current global economic system to handle the severe impact of multiple shocks is under challenge, leading to severe supply-demand imbalances in key sectors and rising inflation in almost all countries.

One such key challenge is combating the globalization of inflation—which has reached multi-decade highs amid slowing global growth. This has given rise to complex policy challenges.

As the main forum for promoting cooperative and effective solutions to global problems, the work of the G20 has been eroded, given the difficulties in building consensus and the uncertainty surrounding the approach to geopolitics. Nazar, he said and emphasized that both the ongoing global crisis is a threat to each other. The opportunity and big test for the G20, which represents 85 percent of global GDP and 75 percent of world trade.

Referring to the IMF, he said that with the Ukraine war, geopolitics has now been overtaken by geoeconomics and due to this the global economy is now facing a process of geo-economic fragmentation, which trade, Technology operates through five main channels of capital flow. Labor Mobility and Global Management.

He said that among the many threats facing the international community, the rise in inflation has created a complex monetary policy dilemma in every economy that requires sufficient interest rate hikes to control inflation, and at the same time, tighter monetary policy. Minimizing the sacrifice of development to avoid landing, he said. .

On the impact of the appreciation of the dollar against countries with high external debt, he urged the G20 countries to support them so that there is no chance of another global crisis.

He also urged the Group of 20 largest economies to ensure that more vulnerable countries receive timely and adequate climate financing.

He noted that tightening by systemic central banks from early 2022 and consequent appreciation of the dollar has made several economies, with large external debt, highly vulnerable to debt distress.

About 15 percent of low-income countries are already in debt distress, while 45 percent are at high risk of additional debt distress, he said, citing IMF data. About 25 percent of EMs are also at high risk.

However, the governor said that we have nothing to worry about on this front, as our external debt is lower than our balance sheet and economic growth rate.

The rise in the dollar further fueled massive capital outflows, leading to reserve losses, sharp currency depreciation and increased import inflationary pressures. He said that in such a situation, the G20 should address the deteriorating debt situation in low- and middle-income countries and facilitate coordinated debt treatment by official bilateral and private lenders under a multilateral framework. It should be given priority.

Summing up, Das said our G20 presidency should focus on financial inclusion, climate change and digital public infrastructure for mitigation to achieve a more inclusive global economic order.

He concluded that the G20 countries have an important responsibility to provide leadership for global action on climate change and to provide climate finance as well as technology transfer to advance this agenda.

(Other than the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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