Inflation risks India : Balancing Growth and Inflation Amid Global Challenges
Mumbai, 14 Nov (City Times) : Inflation risks India : In a speech at the CNBCTV18 Global Leadership Summit, Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted two key economic risks facing India and the world: the potential return of inflation and a slowdown in economic growth. Despite India’s recent economic resilience, Das emphasized that global and domestic challenges, from geopolitical tensions to supply chain disruptions, still threaten the stability achieved through current monetary policies. He assured that while RBI has managed a “soft landing,” vigilance is crucial as inflation risks persist.
Economic Risks: “The Dual Challenge of Inflation and Slow Growth”
Inflation remains a primary concern for central banks worldwide, fueled by supply chain issues and global conflicts like the Ukraine war. Das noted that although India has managed inflation pressures fairly well, risks remain that could push prices higher, ultimately impacting growth. The RBI’s priority, he explained, is to balance these competing forces.
Monetary Policy: “Stable Interest Rates Amid Persistent Inflation”
The RBI has held its policy repo rate at 6.5% for the 10th consecutive time, a decision aimed at controlling inflation while fostering economic stability. However, inflation in essential items, particularly food, poses ongoing challenges. Das reiterated that the RBI remains committed to achieving its inflation target of 4%, though this may be tested by periodic spikes in prices.
Key Monetary Policy Points:
- Repo Rate Stability: Maintaining at 6.5% to control inflation.
- Inflation Target: Persistent focus on reaching 4% amid challenges.
- Impact on Food Prices: Inflation in food continues to strain household budgets.
External Sector Stability: “India’s Resilience in the Face of Global Pressures”
Governor Das shared a positive outlook on India’s external sector, which has demonstrated significant stability. India’s current account deficit (CAD) is within manageable levels at 1.1% of GDP for Q1 2024-25. This resilience is supported by robust growth in service exports, rising remittances, and strong net capital inflows, all of which contribute to the country’s sizable foreign exchange reserves. Inflation risks India
Das: “India’s merchandise and services exports have remained robust, helping contain the current account deficit and strengthening external sector stability.”
India’s External Sector Highlights:
- Current Account Deficit: Contained within 1.1% of GDP.
- Service Exports: Grew by 11% in H1 2024-25, helping balance the deficit.
- Foreign Reserves: India’s reserves stand at $682 billion, the fourth-largest globally.
Inflation risks India : Geopolitical and Environmental Challenges: “Navigating the Unknowns”
Das also spoke about the risks posed by climate change, a factor that increasingly influences economic stability. Recognizing the financial risks associated with environmental issues, the RBI is preparing guidelines for climate-related financial disclosures. These guidelines aim to ensure that banks and financial institutions are better equipped to handle the economic impacts of climate change, which could become more pressing in the future.
Conclusion: “India’s Economic Future – Challenges and Opportunities”
While global risks of inflation and growth slowdown are real, India’s external sector, strong reserves, and resilient exports provide a solid foundation. However, vigilance is essential, as emerging geopolitical and environmental factors could alter the landscape.
