The Reserve Bank of India (RBI), on Monday, said it would deploy all available tools to respond “rapidly and appropriately” to any adverse development due to “turbulent” global situation which could have an impact on India’s growth.
“... recognising that the global situation is turbulent, the Reserve Bank stands ready to use all available instruments and measures to respond rapidly and appropriately to any adverse development,” Reserve Bank of India (RBI) said in its mid-quarterly review.
Debt crisis
The RBI’s observations comes in the backdrop of turmoil in eurozone economies and its impact, which will dominate the agenda of a G-20 summit that begins in Mexico today [Monday].
Worries over debt crisis in Italy and Spain still loom large even as election victory by pro-austerity parties eased fears of a Greek eurozone exit and brought relief to world markets.
Pointing out that eurozone sovereign debt problem had continued to weigh on the global recovery, the Reserve Bank said “renewed concerns have arisen about a sustainable solution to the sovereign debt problem and the increasing vulnerability of the banking sector. Consequently, risk aversion has increased.”
U.S. recovery
The apex bank also noted that recovery in the U.S. economy was weakening, while growth in major emerging and developing economies (EDEs) had been moderating.
“While slowing global growth has dampened commodity prices, heightened risk aversion and the resultant slowing of capital flows will have a significant adverse impact on EDEs, including India,” it said.
“Also, should there be an event shock, central banks in advanced economies will likely do another round of quantitative easing. This will have an adverse impact on growth and inflation in EDEs, particularly on oil importing countries such as India, through a possible rebound in commodity prices.”
