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

Chief Economic Adviser (CEA) V Anantha Nageswaran has said the threats and global headwinds from geopolitical conditions are the near-term challenges for the Indian economy, and may remain for 6-12 months.

In his keynote address at the FE Modern BFSI Summit, Nageswaran said the global situation is leading to high inflation in most countries, high global prices of commodities with significant import dependency (crude oil, edible oil, fertilisers, metals, etc), tightening of monetary policies in most countries and financial and macro instability risk (global spillovers and local risks).

It’s also leading to likely correction in stock markets, supply chain bottleneck (delays and shortage of key inputs), potential global recession with impact on export growth for India and transition to green economy, he said.

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

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Nageswaran said that despite growth revisions by the IMF and World Bank, India is still the fastest growing major economy. India is becoming inflation intolerant, and it is important to stabilise inflation expectations, going forward, he added.

On the state of the banking sector, the CEA noted that the banking sector balance sheets are in good shape with well-capitalised banks and lower bad loan ratios. Economic recovery will drive demand for credit and banks in a position to support the economic growth of the country, he said.

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