India is good with finances but global energy price hike will hurt it, says IMF chief

India has managed its finances very well, but the rise in global energy prices will have a negative impact on its economy, said Kristalina Georgieva, executive director of the International Monetary Fund.

During a media roundtable Thursday on Russia’s invasion of Ukraine and its global implications, Gita Gopinath, the IMF’s first deputy managing director, noted that the war is posing a challenge to economies around the world, including India.

“India is heavily dependent on energy imports and the price is rising. This has an impact on the purchasing power of Indian households.”

“If you look at the inflation numbers, inflation in India is around 6 percent, which is the upper end of the inflation range for the Reserve Bank of India,” Ms Gopinath said.

This has implications for the country’s monetary policy and is a challenge in many parts of the world, not just India, she said.

Ms Georgieva said: “Clearly the most important channel of influence on the Indian economy is energy prices.”

India is an importer and rising energy prices will have a negative impact, she said, adding, “India has managed its finances very well.” She stressed that there is some fiscal space to respond to the challenge.

“Our advice to our members is first and foremost to ensure that you protect the most vulnerable populations from the rise in prices, not just for energy but also for food prices for countries where this will be a significant factor,” directs the IMF director said.

“Aim your fiscal space at those in dire need of support. We would also consider monetary policy responses to see how they could be appropriately timed to match what is happening,” Ms. Georgieva added.