New Delhi, Apr 21 (KNN) Reserve Bank of India (RBI) Governor Sanjay Malhotra has underlined the significant impact of the ongoing crisis in West Asia on India’s economy, citing the country’s deep trade and energy linkages with the region.
“Coming to the present crisis, it particularly impacts us as West Asia contributes about one-sixth of our exports, one-fifth of our imports, half of our crude oil imports, two-fifths of our fertilisers imports and almost two-fifths of our inward remittances,” Malhotra was quoted by news agency PTI while speaking at Princeton University over the weekend.
Measures to Manage Supply Risks
The RBI Governor noted, “Sources of imports are being diversified. While there is no shortage of oil, given the reserves maintained by us, there is some rationing of gas for industrial purposes.”
He added that oil marketing companies and the government have absorbed part of the rise in oil prices, while some increase in gas costs has been passed on to consumers.
Strong Growth Backed by Policy Stability
Highlighting India’s macroeconomic performance, the RBI Governor said the country has recorded an average annual growth rate of 6.1 per cent over the past decade, outperforming the global average of 3.2 per cent. Comparable economies such as China and Indonesia grew at 5.6 per cent and 4.2 per cent, respectively.
He attributed this resilience to strong policy frameworks, financial stability, and credible institutions developed over time.
Calibrated Monetary Policy Approach
Addressing the policy response to the crisis, Malhotra said supply shocks should be managed by looking beyond first-round effects or immediate price impacts, unless they lead to sustained inflationary pressures.
He cautioned, “Second-round effects are the real concern. They can materialise if the supply chain disruptions continue for long. Then, what began as a supply shock can become embedded in the general price level. Preventing this entrenchment is where monetary policy has a primary role to play — through its influence on inflation expectations rather than through blunt demand compression,” as quoted by PTI.
‘Wait-and-Watch’ Policy Stance
The RBI has maintained a cautious, flexible approach with a neutral stance in recent policy cycles. “We are in a wait-and-watch mode,” the Governor noted, adding that the central bank remains data-dependent as it reassesses risks amid evolving inflation-growth dynamics.
Fiscal Support
He also highlighted progress in fiscal consolidation, supported by improved tax collection and better expenditure quality. The government, he added, has complemented monetary policy with supply-side measures to contain price pressures.
(KNN Bureau)
