Sustained price pressures and rising level of debt in South Asia pose risks to the region’s economic growth and both must be contained, according to Reserve Bank of India Governor Shaktikanta Das.
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Sustained price pressures and rising level of debt in South Asia pose risks to the region’s economic growth and both must be contained, according to Reserve Bank of India Governor Shaktikanta Das.
“Prioritizing price stability, may therefore be the optimal policy choice in the current context for the region,” Das said at an International Monetary Fund event in New Delhi on Friday. In his speech, Das also underscored the importance of multilateral agencies in assisting South Asia where surging debt in some places is undermining macroeconomic stability.
“Global cooperation and multilateralism could have played a far stronger role in the recent crisis,” he said at the event, adding that restoring faith on multilateral arrangements is a challenge.
The governor’s comments came as neighboring Sri Lanka and Pakistan are seeking bailout funds amid deteriorating foreign currency reserves. Sri Lanka’s stockpile is below $2 billion while Pakistan’s was below $6 billion. Inflation in the two countries are also among the highest in Asia.
“Deep structural reforms” in the region is necessary and IMF’s role in capacity building would be “extremely useful,” the governor said. As for monetary action, Das said it has to be “targeted and calibrated.”
Das presided over the Reserve Bank of India’s most aggressive tightening cycle that saw the benchmark rate increase by 225 basis points last year as inflation hovered above the central bank’s target for most of 2022.
Other Highlights From Speech
- South Asia must strengthen energy cooperation to boost resilience against external shocks and accelerate transition to green economy as the region is among the most vulnerable to climate change
- Rupee settlement of cross border trade and CBDC can also be areas of greater cooperation in the future, he said, adding that RBI is moving on digital currency in a very cautious manner
- “We are in discussion with countries in the region for trade settlements in rupee. Rupee settlement of trade has very big potential in the years to come,” he said
–With assistance from Devidutta Tripathy.
(Updates with more comments from governor.)
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