India’s macroeconomic fundamentals remain strong, but evolving global developments pose downside risks in terms of spillovers, officials at the Reserve Bank of India wrote in an article in the bank’s monthly bulletin on Thursday.
“The ongoing geopolitical crisis has heightened the uncertainty clouding the global macroeconomic and financial landscape even as the global economy struggles to recover from the pandemic,” they wrote, adding that the uncertain economic outlook increases risks for emerging markets had.
Although India made steady progress domestically, rising oil and gas prices and choppy financial market conditions provided fresh headwinds to the still incomplete global recovery, they noted.
Another group of RBI officials also said that a quick and sweeping withdrawal of fiscal support risks throwing the economy over the cliff into a sharp downturn.
“In exiting, policymakers must grapple with the knife-edge trade-off between cliffs and ramps,” they added.
The RBI has maintained its accommodative stance even as inflation has risen and kept interest rates unchanged, holding them at record lows in the last monetary policy announcement in February.
