Geopolitical tensions biggest risk to country's growth, says RBI expert

New Delhi, August 24

The biggest risk to India’s growth outlook is an escalation of geopolitical tensions, especially if these tensions spread to the Asian region, RBI Monetary Policy Committee (MPC) member Jayanth R Varma said on Wednesday.

Varma said inflation and inflationary expectations appeared to be moderating and high inflation would certainly not become the ‘norm’ in the country. He is cautiously optimistic about the Indian economy as after the pandemic abated, consumption demand has begun to recover though the recovery is uneven across sectors and industries.

“Capacity utilisation has been inching up, and is now approaching levels at which business will have to seriously consider capital expenditure for expansion,” Varma added.

He further noted that the MPC is determined to bring inflation down close to the target rate of 4% as quickly as possible without imposing intolerable costs in terms of economic growth.

The Reserve Bank in its latest MPC meeting in August had decided to increase the benchmark lending rate by 50 basis points to 5.40% to quell inflation.

The central bank has been tasked by the government to ensure that retail inflation remains within the range of 2-6 per cent.

“The biggest risk to the growth outlook is that of an escalation of geopolitical tensions especially if these tensions spread to the Asian region,” he said.

Russia started its military offensive against Ukraine on February 24. Western nations, including the United States, have imposed major economic and other sanctions on Russia following the aggression. — PTI

‘Worst is over’

According to RBI Monetary Policy Committee member Jayanth R Varma, inflation has already peaked and there is reason to believe that the worst is over unless the world is confronted by another global shock.

Curbing inflation

We are determined to bring down inflation to 4 per cent as quickly as possible. — Jayanth R Varma, RBI MPC member

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