Geopolitical disturbances pose daunting challenges to central banks: RBI's Shaktikanta Das

New Delhi: Continuing geopolitical disturbances and geo-economic fragmentations will pose daunting challenges to the central banks, Reserve Bank of India Governor Shaktikanta Das said on Tuesday amid escalating tensions in West Asia.

“Experience of the past few years shows that the journey ahead may be marked by dynamic shifts in geopolitics, with frequent incidences of supply chain disruptions and greater barriers in trade, technology and capital flows,” Das said.  

“These will be the new sources of shocks, often not well captured in existing macroeconomic models. It has become important for central banks to remain vigilant and respond in a nimble, timely and calibrated manner while navigating such turbulences,” he added.

Speaking at an event organised by Nepal Rashtra Bank in Kathmandu, Das said strengthening core fundamentals is the best defence against global uncertainties.

“The Indian economy has rebounded strongly from the pandemic and is contributing more than 18 per cent to the global growth. Inflation is on a declining trajectory. External sector remains resilient with strong buffers. The health of banking and corporate sectors remains strong. Fiscal consolidation is under way,” Das said while delivering the inaugural Himalaya Shumsher Memorial Lecture. Himalaya Shumsher Rana was the first governor of NRB, Nepal’s central bank.

Das claimed that the Indian central bank has managed to shield the economy from multiple shocks in the last few years.

Unlike many central banks which are narrowly focused on price stability using monetary policy, the Reserve Bank has a wider canvas of functions. It is not just responsible for maintaining price stability, but also has the larger responsibility of maintaining financial stability as the regulator and supervisor of banks and other financial sector entities, financial markets and payment systems, he said.

This helps us to take a holistic view of the economy, appreciate the synergy and trade-offs involved in various objectives, and act appropriately using multiple instruments at our disposal,
he added.