Geo-political conflict may snuff out the recovery process, says RBI Deputy Governor, Dr. M D Patra at PHDCCI’s Programme on ‘Geo-political Spill-overs and Indian Economy’

The world has been overwhelmed by the fallout of the geo-political conflict. It threatens to snuff out the recovery that has been hesitantly making its way through the pandemic and India’s economic prospects are also challenged by these developments, stated Dr. M D Patra, Deputy Governor, Reserve Bank of India. He was addressing a Standalone Session physically on ‘Geo-political Spill-overs and Indian Economy’ organized by the PHD Chamber of Commerce and Industry (PHDCCI) at PHD House, New Delhi.

According to Dr Patra, the escalation of geo-political tensions into war from late February 2022 delivered a brutal blow to the global economy, battered as it was throughout 2021 by the pandemic, supply chain and logistics disruptions. He added that it resulted in elevated inflation, and bouts of financial market turbulence triggered by diverging paths of monetary policy normalisation. He revealed that at that time, countries were unsure and started to tighten their monetary policies. He informed that India till that time had a more relaxed view and was free of the inflation surge, but since then the global economic outlook has become suddenly overcast with the economic costs of the war and retaliatory sanctions. Emerging markets are bearing the brunt of this, despite being innocent bystanders.

Dr. Patra added that due to these factors there has been volatility in the financial markets, and surges in prices of commodities especially energy, metal, and fertilizers. Like other emerging markets in the World, India too faces major risks, the immediate ones being soaring crude prices and tightening financial conditions.

Speaking on the measures taken by the RBI, Dr. Patra informed that the monetary policy would continue to be guided by its primary mandate of price stability under the medium term while also ensuring a strong and sustained economic recovery. He explained that the Reserve Bank remains steadfast in its commitment to safeguard trust and confidence in the domestic financial system as we rebuild the foundations of strong and sustainable growth with macro-economic stability.

Mr. Pradeep Multani, President, PHDCCI, in his presidential remarks, mentioned that the industry appreciates the consistent work undertaken by the Reserve Bank of India (RBI) in improving the macro-economic environment in the country. He stated that the extensive and innovative measures announced by the RBI to mitigate the daunting impact of the COVID 19 pandemic and to support the economy amid the recent geo-political development are highly encouraging. He explained that the surge in the international crude oil prices had resulted in the increase in inflation both in the wholesale price index and the CPI.

He also informed that though the RBI’s decision to increase the repo rate would increase the cost of doing business, the decision was in sync with its efforts to tackle persistently elevated inflation.

Mr. Saket Dalmia, Sr. Vice President, PHDCCI, while giving the vote of thanks mentioned that the industry looks up to the RBI to help them navigate through these difficult times.