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India good at managing finances but global energy price rise will hurt it: IMF MD

India good at managing finances but global energy price rise will hurt it: IMF MD


India good at managing finances but global energy price rise will hurt it: IMF MD

India has been very good at managing its finances but the surge in global energy prices after Russia’s military operations in Ukraine is going to have a negative impact on its economy, according to IMF Managing Director Kristalina Georgieva.

The head of the International Monetary Fund (IMF), during a media round table on Thursday on the Russian invasion of Ukraine, told a select group of reporters that the most significant channel of impact on the Indian economy is energy prices. India is an importer, and the increase in energy prices is going to have a negative impact, Georgieva said. “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.

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“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.

During the roundtable, Gita Gopinath, who is the First Deputy Managing Director of the IMF, observed that the Ukraine war has posed a challenge to economies around the world, including India. “India relies heavily on energy imports and the price is going up. That has implications on the purchasing power of Indian households. “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 said.

This has implications on the monetary policy in the country and it is a challenge in many parts of the world, not just India, she added. The US, the EU and the allied countries have imposed punitive sanctions against Russia covering almost all areas, including de-linking Moscow from the international banking system SWIFT after the Russian military invaded Ukraine on February 24. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the world’s main banking messaging service which links around 11,000 banks and institutions in more than 200 countries, including India.

The US has also banned oil, gas and coal imports from Russia. Based in Belgium, the system is considered central to the smooth functioning of global finances and Russia’s exclusion from it would hit the country hard.

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