‘Geopolitical climate poses near-term challenges for Indian economy’: Chief Economic Adviser

Chief Economic Adviser (CEA) V Anantha Nageswaran has mentioned the threats and world headwinds from geopolitical situations are the near-term challenges for the Indian financial system, and will stay for 6-12 months.

In his keynote deal with on the FE Modern BFSI Summit, Nageswaran mentioned the worldwide scenario is resulting in excessive inflation in most international locations, excessive world costs of commodities with vital import dependency (crude oil, edible oil, fertilisers, metals, and many others), tightening of financial insurance policies in most international locations and monetary and macro instability threat (world spillovers and native dangers).

It’s additionally resulting in probably correction in inventory markets, provide chain bottleneck (delays and absence of key inputs), potential world recession with affect on export progress for India and transition to inexperienced financial system, he mentioned.

India was hit by geopolitical battle simply when it was re-emerging from two years of Covid pandemic.

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Nageswaran mentioned that regardless of progress revisions by the IMF and World Bank, India continues to be the quickest rising main financial system. India is turning into inflation illiberal, and you will need to stabilise inflation expectations, going ahead, he added.

On the state of the banking sector, the CEA famous that the banking sector stability sheets are in fine condition with well-capitalised banks and decrease dangerous mortgage ratios. Economic restoration will drive demand for credit score and banks able to assist the financial progress of the nation, he mentioned.