Informist, Thursday, Nov. 21, 2024

NEW DELHI – Sustained growth, price and financial stability continue to be daunting challenges for the countries of the Global South, Reserve Bank of India Governor Shaktikanta Das said Thursday.

"Central banks need to work towards more robust, realistic and nimble policy frameworks that use monetary, prudential and fiscal and structural policies synergistically to achieve the desired outcomes," Das said at a high-level policy conference of central banks from the Global South in Mumbai.

The governor also said that countries of the Global South face extra challenges when it comes to balancing inflation and growth. "The Global South faces more difficult growth-inflation trade-offs. Unlike advanced economies, these countries have a lot of catching up to do to increase their per capita income and productivity," he said.

Das further said that to achieve higher growth, countries in the Global South need to step up investment in physical and social infrastructure, leverage technology and innovations, and carry out institutional reforms. "All these require congenial public policies, including monetary policies to be growth-supportive while maintaining balance with inflation," he said. The governor said that the role of fiscal and monetary coordination is very crucial for countries of the Global South to manage the balance between growth and supply-driven inflation.

Emphasising the importance of communication in monetary policy, the governor said the RBI has actively used communication to anchor inflation expectations. "When we took a pause on the policy rate in April 2023, after having raised it by 250 basis points, it was important to anchor market expectations from running ahead or front-running the central bank. It was, therefore, emphasised that it was a pause, not a pivot," he said. Flagging that a cloud of uncertainty still looms over the global economy, Das said historical regularities look improbable, and policy makers are being put to the test at the moment. End

Reported by Pratiksha

Edited by Namrata Rao

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