RBI Governor Raghuram Rajan today said domestic policies need to be carefully calibrated to withstand global headwinds due to China’s slowdown and the US rate hike, even though India remains “relatively better placed” to handle volatilities.
“The recent Fed Fund rate hike and the developments in China call for a careful calibration of domestic policies to withstand global headwinds,” Rajan said in the latest Financial Stability Report (FSR).
The FSR is released by the RBI on behalf of the Financial Stability and Development Council (FSDC).
In his first comments following his American counterpart Janet Yellen’s decision to hike rate by 0.25 to 0.50 per cent, Rajan said though “we appear to be relatively better placed” there are challenges, including a possible spike in inflation we need to stand guard against.
The challenges will emanate from weaker growth prospects in the key advanced and emerging market economies, combined with tighter financial market conditions and weak commodity prices, he said.