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Inflation control is South Asia’s top goal: RBI Governor

Inflation control is South Asia's top goal: RBI Governor

Multiple external shocks in the form of Covid-related global supply chain disruptions, food, and energy crisis following the war in Ukraine, and financial market volatility arising from the aggressive monetary policy tightening have exerted sustained price pressures in the South Asian economies, as in other parts of the world. If price pressures persist at high levels, risks to investment and growth outlook would rise. Hence, taming inflation is the top priority for the South Asian countries, said RBU Governor Shaktikanta Das.

Speaking at an event organized by the International Monetary Fund (IMF) in New Delhi, Das said that during the first three quarters of 2022, food price inflation in South Asia averaged more than 20%. The region’s heavy dependence on imported fossil fuels has made it vulnerable to imported fuel inflation. For successful disinflation, credible monetary policy actions accompanied by targeted supply-side interventions, fiscal, trade policy and administrative measures have become the key instruments.

With the global trade outlook for 2023 overcast, greater intra-regional trade in South Asia can enhance opportunities for growth and employment in the region. At the central bank level, a key dimension of cooperation in the region has been learning from each other on common goals and challenges, such as infrastructure financing, digital financial inclusion, reducing the cost of cross-border remittances (by linking with UPI system) and unconventional monetary policy, to name a few.

Rupee settlement of cross-border trade and Central Bank Digital Currency (CBDC) where the RBI has already started moving forward, can also be areas of greater cooperation in the future, Das added.

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