RBI Governor Shaktikanta Das on Thursday said that there is little space for any fiscal expansion by government. Mr Das was speaking at the Bloomberg India Economic Forum in Mumbai. He said that international environment is clouded with challenging conditions. “Global growth is slowing down and central banks across world are bracing up to counter it by easing monetary policy; but there is no recession as yet,” he added.
Mr Das said that he expects US Fed’s latest rate cut to boost fund inflows into the country, mostly via Foreign Direct Investment (FDI). US Federal Reserve cut its benchmark interest rate by 25 basis points, but dimmed hopes for further rate cuts as it took a cautious approach to further reductions in borrowing costs.
On the rising crude rates, he said that the ongoing crisis in Saudi Arabia that has spiked crude prices to multi-year highs will have limited impact on inflation and fiscal numbers. A massive drone strike on the world’s largest crude-processing facility operated by Saudi Aramco on Saturday drove oil prices to their highest level in nearly four months. The attack had knocked out over half of Saudi Arabia’s production as it cut 5.7 million barrels per day or over 5 per cent of the world’s supply.
According to the RBI Governor, Indians, Indian entrepreneurship and the rupee are progressively internationalising. India’s working-age population has grown larger than the dependent population, and this demographic advantage is expected to last till 2055.
“In this milieu, prudent external sector management with a close and continuous vigil on areas of external vulnerability assumes critical importance and will continue to receive RBI’s close attention,” he said.
