New Delhi: Rising tensions in West Asia are beginning to impact global inflation expectations and business confidence, creating fresh challenges for central banks worldwide, according to Anuradha Thakur.
Speaking at the CNBC Awaaz Bharat Economic Samvad, the Department of Economic Affairs Secretary said central banks are facing the difficult task of controlling inflation while also ensuring that economic growth remains stable. She noted that geopolitical uncertainty, especially in energy producing regions, could continue to affect global markets even if tensions ease in the coming months.
Thakur cautioned that the impact of instability may persist for some time and stressed the need for constant monitoring of India’s current account deficit and broader economic indicators. She added that both domestic and international investors have repeatedly expressed concerns over global tensions and their possible economic consequences.
According to the senior official, the world economy is already under pressure from higher commodity prices, disrupted trade routes, and tighter financial conditions. Emerging economies are also experiencing rising bond yields and volatile capital flows as investors react cautiously to geopolitical developments.
Despite the challenges, Thakur said India’s economic position remains stronger compared to earlier periods of global uncertainty. She highlighted domestic consumption, capital expenditure, and the services sector as key drivers supporting the country’s growth momentum.
She also pointed to lower retail inflation, a stronger banking system, and foreign exchange reserves of nearly 700 billion dollars as important stabilising factors for the Indian economy. However, she warned that a sustained rise in crude oil prices could eventually affect inflation, fiscal management, and the current account deficit because of India’s dependence on imported energy.
The official added that prices of fertilisers, metals, and several raw materials have already increased, raising concerns that wholesale inflationary pressures could gradually be passed on to consumers.
On the energy front, she said India has diversified its crude oil sourcing network significantly in recent years and now imports oil from around 40 countries, reducing dependence on regions directly affected by ongoing conflicts.
Meanwhile, market participants largely expect the Reserve Bank of India to maintain interest rates at its upcoming monetary policy meeting. However, some analysts believe persistent inflationary pressures linked to geopolitical tensions could eventually force the central bank to begin tightening rates later in the financial year.
