Prolonged war to be detrimental to the broader global outlook: RBI bulletin

Prolonged period of war and high uncertainty would be detrimental to the broader global outlook, which was already in a state of flux prior to the recent events,” Reserve Bank of India (RBI) officials said in the March edition of RBI Bulletin released on Monday. 

“For the domestic economy, given India’s external dependence on crude oil, the evolving situation requires close monitoring and proactive measures to limit adverse spillovers even though it is mention worthy that the capacity and resilience of the Indian economy to absorb external shocks have strengthened over time, buttressed by its strong growth, sound macroeconomic fundamentals and robust external sector buffers,” they emphasised in the State of the Economy article.

Stating that in terms of energy security, India has progressively diversified its crude oil import sources and augmented its domestic refining capacity, they said since the start of the conflict, several policy measures have been implemented to blunt the immediate impact of the disruptions in global fuel supply chains and to achieve more effective use of domestic capacity to meet shortfalls.

The creation of an Economic Stabilisation Fund would further provide fiscal headroom and buffer to proactively respond to global headwinds, they pointed out. 

They said the renewed conflict in West Asia and the U.S. investigations into trade practices of key trading partners have brought uncertainties regarding global energy security,  U.S. import tariffs and global supply chains back to the centre stage.