Reserve Bank of India (RBI) Governor Shaktikanta Das Saturday said the after effects of Covid-19 pandemic, Russia-Ukraine war and global monetary tightening are still unfolding and need constant monitoring.
He said the research function of RBI must remain prepared to respond to these multiple possibilities as it has done in the past.
“Since March 2020, three major shocks – the COVID-19 pandemic, the war in Europe and the aggressive tightening of monetary policy across countries – have posed very different set of challenges for economic research
“The after effects of the three shocks are still unfolding and would warrant constant vigil,” Das said while speaking at the annual research conference of its Department of Economic and Policy Research (DEPR).
According to him, the economics profession today faces one of its toughest times as the global economy has been hit by multiple shocks one after the other.
These shocks have led to globalisation of inflation, with advanced economies (AEs) facing multi-decadal high inflation and sustained slowdown in economic growth and trade, together with rising concerns about a possible global recession.
They have also resulted in deteriorating global food and energy security situation, realignment of global supply chains and policy-induced deglobalisation and weakening influence of multinational institutions in providing coordinated solutions to address global problems.
“Emerging market economies (EMEs) face an additional challenge from threats to their external sector stability,” he said.
The governor said synchronised tightening of monetary policy globally has progressively increased the risk of a hard landing, i.e., a recession to tame inflation.
“India is, however, differently placed,” Das noted.
He said the trifecta of deglobalisation, climate change and deeper penetration of technology appears to be the most anticipated trend for the future.
“This can be potentially disruptive, requiring strategies to mitigate the associated risks,” the governor said.
The governor said the world we face today is aptly described by using the acronym ‘Vuca’, which stands for volatility, uncertainty, complexity and ambiguity.
“Many of the backward-looking models that run on past data, may fall short of providing useful information and estimates for policy,” he said, adding that DEPR should further strengthen its consultative approach to collect first-hand information directly from the stakeholders.
Das said a team from RBI is working jointly with the Indian Council for Research on International Economic Relations (ICRIER) to develop a food inflation projection framework, involving eminent agri-experts and market leaders in different food items.