India’s economy strong enough to face external shocks, RBI says

[MUMBAI] India’s foreign exchange reserves and strong economic fundamentals will help cushion against external shocks and increased volatility in the global markets, the Reserve Bank of India said on Monday (Mar 23). 

The Middle East conflict and US investigation on its trade partners have revived concerns over energy security, tariffs and global supply chains, the central bank said in its State of the Economy report. A prolonged war would also further darken an already fragile global outlook. 

Given India’s dependence on crude oil, “the evolving situation requires close monitoring and proactive measures to limit adverse spillovers,” the report said. However, “the capacity and resilience of the Indian economy to absorb external shocks have strengthened over time,” it said. 

India’s US$710 billion of foreign exchange reserves, strong growth, and sound macroeconomic fundamentals give the country strength. The creation of an economic stabilisation fund “would further provide fiscal headroom and buffer to proactively respond to global headwinds,” the central bank said. BLOOMBERG