Global Economy Faces Persistent Volatility India Remains Resilient: FM Sitharaman

(MENAFN- KNN India) New Delhi, Apr 7 (KNN) Finance Minister Nirmala Sitharaman on Monday said the global economy has transitioned from a phase of isolated shocks to one of 'permanent volatility', driven by geopolitical conflicts and economic disruptions.

Addressing the golden jubilee event of the National Institute of Public Finance and Policy (NIPFP) in New Delhi, she highlighted a series of global challenges-from the COVID-19 pandemic and the Russia-Ukraine war to ongoing tensions in West Asia and trade uncertainties linked to US policies.

She noted that the escalation in West Asia has evolved into a systemic global concern, impacting energy supply chains and contributing to a shifting multipolar world order.

Sitharaman flagged rising global debt as a major concern, citing International Monetary Fund data showing public debt has reached about USD 106 trillion, or over 95 per cent of global GDP.

She pointed out that advanced economies such as the United States and Japan face high debt levels, limiting their ability to respond to new economic shocks.

In contrast, Sitharaman said India's macroeconomic fundamentals remain relatively strong. The country's general government debt-to-GDP ratio stands at around 81 per cent and is projected to decline further in the coming years.

She also highlighted India's low external debt ratio and robust foreign exchange reserves of over USD 688 billion, providing an import cover of nearly 11 months.

The minister said prudent fiscal management over the past decade has created room for policy support. This includes the ability to sustain capital expenditure, enable monetary easing by the Reserve Bank of India, and extend targeted assistance to sectors affected by external shocks.

She noted that unlike many high-debt economies facing difficult trade-offs, India retains the capacity to respond counter-cyclically during downturns.

Sitharaman said the government has developed an emergency response mechanism since the pandemic, helping it manage current challenges such as rising energy prices and supply disruptions.

She acknowledged uncertainties in areas like fertiliser imports due to logistical and insurance issues, adding that provisions of Rs 1 lakh crore have been set aside for contingencies.

While India continues to be the fastest-growing major economy, the minister cautioned that prolonged geopolitical tensions could impact growth and inflation. Rising oil prices and global disruptions are expected to exert pressure on government finances and economic activity.

She added that the government remains committed to supporting vulnerable sections, including senior citizens, while ensuring stability in the broader economy.

(KNN Bureau)

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