Strengthening one's fundamentals, coupled with prudent fiscal management can enhance the resilience of emerging market economies, Reserve Bank of India Governor Shaktikanta Das said on Tuesday.
"While the resilience of EMEs (emerging market economies) will be tested in the face of new challenges cropping up frequently...the foremost lesson is that strengthening one's fundamentals is the best buffer against global spill overs in today's uncertain world," Das said in a speech at the 'Central Banking in the 21st Century: Changing Paradigm' event in Nepal.
Today, the Indian economy demonstrates vastly improved macroeconomic fundamentals and buffers, he said.
Severe climate related events, geopolitical disruptions, rise in technology adoption, fintech innovations and artificial intelligence are some of the key challenges for central banks in the 21st century, Das said.
While climate change and geopolitics may work as supply shocks to fuel inflationary pressures and slow down global growth and trade, innovation and artificial intelligence can help in enhancing productivity and reducing costs, according to the governor.
"The net effect will depend, to a great extent, upon central banks' own capabilities in harnessing the potential while managing the transition. This, in turn, will determine the financial landscape of the 21st century," he said.
Overall, the Indian economy has rebounded strongly from the pandemic and is contributing over 18% to global growth, Das said.
While inflation in India is on a declining trajectory, external sector remains resilient with strong buffers and the health of banking and corporate sectors remain strong amid fiscal consolidation under way, he said.
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