rbi: With war in Europe, world encounters food and energy crisis: RBI Governor Das

The war in Europe brought new challenges, just when the economy was about to fully normalize despite the third wave of the COVID-19 pandemic and suddenly the world encountered a severe food and energy crisis, Reserve Bank Governor Shaktikanta Das said on Saturday. . Delivering the keynote address at the RBI Economics and Policy Research Department’s annual research conference here, Das said the COVID-19 pandemic crisis has created an opportunity to explore and harness the power of big data and strengthen direct feedback mechanisms while working from home.

He further stated that the pandemic also poses new research problems and analytical challenges for policy-making as it causes a demand shock or a supply shock, the size and nature of stimulus measures needed and their effectiveness, among others.

The RBI Governor said the first major challenge was data collection during the first wave of the pandemic and the associated statistical break in data. During the second, deadlier wave, gathering information on sector-level stress became even more important for the design of targeted policy interventions.

“The war in Europe brought with it new challenges, just when the economy was on the verge of full normalization despite the third wave of the pandemic. Suddenly the world encountered a severe food crisis and an energy crisis. A new risk has emerged in the form of fragmentation of the global economy driven by rapidly changing geopolitical considerations, which have underscored the need to reduce reliance on a single critical source of supply” , said Das.

Commodity prices have skyrocketed and supply chains have become even more knotted. These factors have led to the globalization of inflation, and policymakers have faced a new set of research challenges – understanding the magnitude and likely persistence of these shocks, the transmission channels of these shocks, and the effectiveness alternative policy tools, the regulator said.

While countries resorted to trade policy measures (tariffs and non-tariffs) and fiscal measures (price freezes, tax cuts and subsidies to vulnerable people), the relevance of these measures in the Indian context also required a careful research attention, he added.

According to him, since March 2020, three major shocks – the COVID-19 pandemic, war in Europe and aggressive monetary policy tightening in all countries – have posed a very different set of challenges for economic research, a- he declared.

The after-effects of the three shocks are still being felt and would justify constant vigilance. The RBI’s research function must therefore remain ready to respond to these multiple possibilities as it has done in the past, he warned.

The war in Europe brought new challenges, just as the economy was on the verge of full normalization despite the third wave of the pandemic. Suddenly, the world encountered a severe food crisis and an energy crisis, he added.

A new risk has emerged in the form of a fragmentation of the global economy driven by rapidly changing geopolitical considerations, which have highlighted the need to reduce dependence on a single source of critical supplies. , did he declare.

Central banks have a culture of diligently building synergies between research and policy-making and thus research departments are empowered to work as a workhorse and think tank to ensure a continuous supply of reliable processed information, in analytical research and new ideas, he said.