Risk of stagflation increased across the world, although recovery in Indian economy persisted despite pressure: RBI

Domestic financial system remains strong

According to the RBI report, at present, the Indian financial system remains strong. However, he is facing the pressure of shocks and geo-political tensions coming from all over the world. But the system has shown the ability to withstand this shock

According to the Reserve Bank, there is uncertainty in the economies of the world due to the epidemic and the Russia-Ukraine crisis. But even in the midst of these pressures, recovery is being seen in India. reserve Bank ,RBI) has said this in the Financial Stability Report for June 2022. In the report, Central Bank Governor Shaktikanta Das has written that the recovery of the world which was earlier than the epidemic (covid) and the new virus has now come under pressure due to military conflicts and sanctions being imposed by countries. However, recovery in India remains, he said. and financial systems (Financial System is in a strong position. At the same time, the system has the ability to stand up against shocks and risks from around the world. But the effect of worldwide pressure is being seen on the domestic economies, while the inflation rate has also become a challenge.

Inflation pressure increases the risk of stagflation

The governor of the Reserve Bank said that the risk of stagflation has increased worldwide due to restrictions and inflation. Stagflation is a situation where there is an increase in inflation, but the economy starts to slow down, which has a bad effect on employment. This situation is considered quite negative for the economy. According to the Reserve Bank Governor, at present, there is no solution to this situation in the near future, in such a situation, the economies need to control inflation by shifting the focus to growth. Along with this, there is also a need to maintain economic stability.

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Strengthening of Indian Financial System

At the same time, he said that for the time being, the Indian financial system remains strong. However, the impact of the shocks and geo-political tensions coming from all over the world is being seen on them. But the system has shown the ability to bear this shock and they are standing firm. He said that the Indian economy remains in recovery due to strong fundamentals. There is no shortage of money in the financial system and it seems to be returning towards profits. He said that the stress test has proved that Indian banks are in a position to bear even the biggest pressure. At the same time, he also said that the central bank is taking such steps thoughtfully, which are meeting the need of the time on one hand and on the other hand are also working to support growth. The Governor said that the Reserve Bank and other regulators of the financial sector are committed to take steps to ensure financial stability and sustain economic growth.