India has managed its finances very well, but soaring global energy prices are going to have a negative impact on its economy, said Kristalina Georgieva, Managing Director of the International Monetary Fund.
During a media roundtable on Thursday on the Russian invasion of Ukraine and its global impact, Gita Gopinath, who is the first deputy managing director of the IMF, observed that the war has posed a challenge to economies around the world, including India.
“India is heavily dependent on energy imports and prices are rising. This has implications for the purchasing power of Indian households.”
“If you look at headline inflation numbers, inflation in India is close to around 6%, which is the upper end of the inflation range for the Reserve Bank of India,” Gopinath said.
This has implications for the country’s monetary policy and is a challenge in many parts of the world, not just India, she said.
Georgieva said: “It is clear that the most important channel of impact on the Indian economy is the price of energy.”
India is an importer and rising energy prices will have a negative impact, she said, adding, “India has managed its finances very well.”
She pointed out that there are fiscal spaces to be able to meet the challenge.
“Our advice to our members is above all to ensure that we protect the most vulnerable populations from soaring prices, not only of energy but also of food prices for countries where this is going to be an important factor,” said the IMF. said the director.
“Target your fiscal space on those who urgently need support. We will also be looking at monetary policy responses, to see how they might be appropriately calibrated based on what is happening,” Georgieva added. .