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Little Space For Any Fiscal Expansion By Government: Shaktikanta Das

Shaktikanta Das expects US Fed's latest rate cut to boost fund inflows into the country, mostly via FDI.

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Little Space For Any Fiscal Expansion By Government: Shaktikanta Das

Shaktikanta Das said the recent rise in crude prices will not have a significant impact on inflation.


Reserve Bank of India Governor Shaktikanta Das on Thursday said that there is little space for any fiscal expansion by the government. The central bank chief was speaking at the Bloomberg India Economic Forum in Mumbai. Describing the international environment today as one is clouded with challenging conditions, he said: "Global growth is slowing down and central banks across world are bracing up to counter it by easing monetary policy; but there is no recession as yet."

The US central bank's latest reduction in interest rates is expected to boost fund inflows into India, mostly via foreign direct investment (FDI), the RBI Governor said. Lowering the key interest rates for a second time this year, the Federal Reserve on Wednesday cut its benchmark interest rate by 25 basis points to a range of 1.75 per cent to 2.00 per cent. The US central bank, however, dimmed hopes for further rate cuts as it took a cautious approach to further reductions in borrowing costs.

On the recent rise in crude oil prices, Mr Das said that the ongoing crisis in Saudi Arabia will have limited impact on inflation and fiscal numbers.

A drone strike on the world's largest crude-processing facility operated by Saudi Aramco on Saturday knocked out over half of Saudi Arabia's production, and drove crude oil prices to their highest level in nearly four months. Saudi Arabia has said it would restore lost production by the end of this month, and bring its capacity back to 12 million barrels per day by the end of November.

According to the RBI Governor, Indians, Indian entrepreneurship and the rupee are progressively internationalising. India's working-age population has grown larger than the dependent population, and this demographic advantage is expected to last till 2055, he said. 

"In this milieu, prudent external sector management with a close and continuous vigil on areas of external vulnerability assumes critical importance and will continue to receive RBI's close attention," he added.



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