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“Successive shocks to the global economy are today taking their toll in terms of globalized inflationary surges, tightening of financial conditions, sharp appreciation of the US dollar and lower growth across geographies. The pandemic and the war has ignited tendencies towards greater fragmentation, reshoring of supply chains and retrenchment of capital flows, which will pose long term challenges to both globalization and the global economy,” Das added.
The RBI governor further mentioned that in the wake of heightened risks to the global economy, multilateral institutions, including the International Monetary Fund (IMF) have revised global growth projections downwards and highlighted recession risks.
Explaining the potential risks to emerging market economies, he added these risks are magnified as they have to contend with both domestic growth inflation trade-offs and spillovers from the most synchronized monetary policy tightening worldwide.
“Emerging market economies are also facing rapid tightening of external financial conditions. capital outflows, currency depreciations and reserve losses — all happening simultaneously. Some of them are also facing mounting burdens of debt and default. elevated food and energy prices and shortages are rendering their populations vulnerable to the insecurity of livelihood,” he said.
He added the Indian economy has naturally been impacted by the global economic situation. “We have been grappling with the problem of high inflation. financial markets and remained uneasy despite intermediate corrections. We have witnessed large portfolio outflows to the tune of $13. 3 billion during the current financial year so far, that is till August 3. Nevertheless, with strong and resilient fundamentals, India is expected to be amongst the best economies during the financial year 2022-23 according to the projections of the IMF.”
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