Protectionism, tariffs among major challenges: RBI Governor Shaktikanta Das

Says India well-placed to deal with any spillover effects of global shocks

Amid looming trade war in Donald Trump’s second term as President of the United States, the Reserve Bank of India (RBI) is confident in being able to handle the blowback from global shocks emanating from such policies.

 

In an interview with the Financial Times, RBI Governor Shaktikanta Das termed “protectionism” and “tariffs” the biggest challenges, and said India was well placed to deal with any spillover from external sources.

 

“These are issues on which we have no control,” he said.

 

Foreign investors have been pulling out of debt and equity markets since Trump won the presidential elections earlier this month. This has put pressure on the rupee, which hit a new low of 84.50 a dollar last week.

 

 

The RBI, which has forex reserves of $658 billion (as of November 15), has been intervening to curb volatility, which has slowed the pace of depreciation.

 

Trump has announced imposing tariffs on China, Mexico, and Canada. India has been absent from Trump’s tariff plan till now.

 

He said he would sign an executive order to implement 25 per cent tariffs on all imports from Mexico and Canada. Additionally, Chinese goods will face a 10 per cent tariffs until Beijing takes steps to curb the smuggling of synthetic opioid fentanyl into the US.

 

Das, who will chair the last Monetary Policy Committee Meeting of his current term between December 4 and 6, refrained from giving a forward guidance on rates because that would be “very risky” due to “so many uncertainties”.

 

He also said “headline inflation is our target and rightly so”.

 

After increasing the policy repo rate by 250 basis points between May 2022 and February 2023, the RBI has maintained the status quo on rates.

 

In the last policy-review meeting in December, the six-member committee changed the stance to “neutral” from “withdrawal of accommodation”.

 

A rate-cut expectation, however, has been postponed with the retail headline inflation rate topping 6 per cent in October, above the central bank’s tolerance level.