Reserve Bank Governor Shaktikanta Das on Thursday said recurring food price shocks and renewed flash points on the geo-political front pose challenges in tackling inflation.
"We remain vigilant to navigate through the last mile of disinflation as it is often the most difficult part of the journey. We firmly recognise that stable and low inflation will provide the necessary bedrock for sustainable economic growth," the governor said.
Das stressed that stable and low inflation will provide the necessary bedrock for sustainable economic growth.
India has successfully navigated through multiple challenges and emerged as the fastest-growing large economy, he said in his keynote address at the 59th SEACEN Governors' Conference here.
"Prudent monetary and fiscal policies have paved the path for India’s success in sailing through these rough waters. The Reserve Bank projects the Indian economy to grow by 7.0 per cent during 2024-25, marking the fourth successive year of growth at or above 7 per cent," he added.
Das further said inflation has moderated from the highs of the summer of 2022.
The retail inflation, which the RBI mainly factors in while arriving at its bi-monthly monetary policy, is inching towards its target of 4 per cent, with the January imprint at 5.1 per cent.
He highlighted that recurring food price shocks and renewed flash points on the geo-political front pose challenges to the ongoing disinflation process.
He was speaking on the topic 'Fundamental Shifts in the Global Economy: New Complexities, Challenges and Policy Options'.
India’s coordinated policy response in the face of a series of adverse shocks can be a good template for the future, the governor noted.
While monetary policy worked on anchoring inflation expectations and quelling demand-pull pressures, supply-side interventions by the government alleviated supply-side pressures and moderated cost-push inflation. Effective fiscal-monetary coordination was at the core of India's success, he added.
The governor said the global economy stands at a crossroads, and challenges remain in plenty, but new opportunities are also knocking at the door.
"Together, the course we take from here will decide our destiny in times to come. We need policies that are attuned to the new realities of the global economy. In an uncertain world, central banks need to be proactive to better serve the objectives of price and financial stability," he said.
He noted that prospects of a soft landing have improved for the global economy, but there are multiple challenges with uncertainties looming on the horizon.
In his address, he suggested five possible policy choices for the future course of the global economy as new realities take shape in the years to come.
"Our sustained engagement in the India Stack and the Unified Payments Interface (UPI), especially during the pandemic and thereafter, has given us the confidence that digital public infrastructure can become a critical part of global public good when scaled up beyond national boundaries," the governor said.
The linkage of the Indian UPI and the fast payment systems of a few other countries drives home the potential of the UPI to become an international model for cross-border payments, he added.
Das said SEACEN, as a platform for central banks of the region, serves as a valuable forum for sharing insights and fostering cooperation in several areas for enhanced progress and prosperity.
The cooperation among countries should give due consideration to the principles of comparative advantage and resource endowments so that each one of us benefits, he added.
The Reserve Bank of India is the current Chair of the SEACEN (South East Asian Central Banks) forum.
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