Unfolding global developments pose risks to economy: RBI officials

India’s macroeconomic fundamentals remain strong but the unfolding global developments pose downside risks in terms of spillover, Reserve Bank of India officials 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 world economy struggles to recover from the pandemic,” they wrote, adding that the uncertain economic outlook had increased risks to emerging economies.

Even though India was making steady progress on the domestic front, the spiralling oil and gas prices and unsettled financial market conditions also posed fresh headwinds to the still incomplete global recovery, they observed.

Another group of RBI officials also said that a rapid and large withdrawal of fiscal support risked pushing the economy over the cliff into a sharp downturn.

“Exiting, policy makers have to contend with the razor’s edge trade-off between cliffs and ramps,” they added.

The RBI has continued with an accommodative stance even as inflation has inched up and left the key lending rate unchanged, keeping it at record lows in the last policy announcement made in February.