Reserve Bank of India Governor Shaktikanta Das said a synchronised tightening of monetary policy globally has progressively increased the risk of a hard landing, which is a recession to tame inflation. India, however, is differently placed.
The Governor was speaking about the rising inflation across the world and said that inflation in systemically important advanced economies turned out to be persistent rather than transitory. The third shock emanated in the form of aggressive tightening of monetary policy by the US Federal Reserve, and subsequent unrelenting appreciation of the US dollar.
During the annual research conference of the Department of Economic and Policy Research (DEPR) of RBI in Hyderabad on Saturday, he said, “Spillovers to EMEs (emerging market economies), and to India, were in the form of capital outflows, depreciation pressures on currencies, reserve losses and imported inflation.”
The age-old research issues for emerging market economies like external sector sustainability assessment, feasible range of policy options to preserve sustainability, and analysis of their effectiveness have once again come to the forefront, more so because the nature and size of the spillover risk is very different now, according to the Governor.