Lagatar24 Desk
New Delhi, Mar 11: IMF Managing Director Kristalina Georgieva said that India has been very efficient at managing its finances, but the rise in global energy costs following Russia’s military operations in Ukraine will have a severe impact on its economy.
During a media round table on the Russian invasion of Ukraine, the head of the International Monetary Fund (IMF) informed a small group of reporters that the most significant channel of impact on the Indian economy is energy prices.
India is an importer, and rising energy prices will have a detrimental impact, according to Georgieva.
“India has been very good in managing its finances,” she said, adding that there are some fiscal spaces to be able to respond to the challenge.
“Our advice to our members is first and foremost make sure that you protect the most vulnerable populations from the shot up of prices, not only energy but also foot food prices for countries where this is going to be a significant factor,” the IMF managing director said.
“Target your fiscal space to those that are in a grievous need to be supported. We would also be looking into monetary policy responses, as to how they could be calibrated appropriately to what is happening,” Georgieva added.
Gita Gopinath, the IMF’s First Deputy Managing Director, said during the discussion that the Ukraine conflict has provided a challenge to economies all around the world, including India’s.
“India relies heavily on energy imports and the price is going up. That has implications on the purchasing power of Indian households,” she said.
“If you’re looking at headline inflation numbers, inflation in India is close to around six per cent, which is the upper end of the inflation band for the Reserve Bank of India,” Gopinath added.
This affects the country’s monetary policy, and it’s a problem in many countries of the world, not just India, she noted.
After the Russian military invaded Ukraine on February 24, the US, the EU, and allied countries levied harsh sanctions against Russia in practically every sector, including de-linking Moscow from the international banking system SWIFT.
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the world’s most widely used banking messaging system, connecting over 11,000 banks and institutions in over 200 countries, including India.
Imports of Russian oil, gas, and coal have also been restricted in the United States.
The system, which is based in Belgium, is deemed critical to the proper operation of global financial markets, and its absence would be devastating to Russia.
