'Extremely Premature' to Call Taiwan Crisis a Black Swan Event, Reserve Bank of India Governor Says
11:00 GMT 05.08.2022 (Updated: 13:55 GMT 06.08.2022)
The Indian economy has experienced turbulence due to the COVID-19 pandemic and the Ukraine crisis. The Reserve Bank of India (RBI) has forecast a growth rate of over seven percent GDP in 2022-23. But more than seven percent inflation, triggered by higher crude oil and commodities prices, continues to keep the federal bank on its toes.
Reserve Bank of India Governor Shaktikanta Das on Friday expressed absolute confidence in the Indian economy, describing it as an "island of macroeconomic and financial stability" in an ocean of "high turbulence and uncertainty."
The governor refused to call the Taiwan crisis provoked by US House Speaker Nancy Pelosi's visit to China's breakaway province a Black Swan event, which refers to an unpredictable situation with negative consequences.
"It will be extremely premature to call it Black Swan event because we are just about two-three days into it," the RBI governor stated during a press conference after an upward policy rate revision of 0.5 percent.
The reaction came as China launched live-fire drills across the Taiwan Strait
on Thursday in response to Pelosi's visit to the island with a delegation of congressional Democrats on August 2. China slammed the US for escalating regional tensions and has already taken an array of measures
in response to the House speaker's trip. Beijing views Taiwan as an inalienable part of the country that, it hopes, will ultimately reunite with Mainland China.
Pointing at India's "minuscule" trade ties with Taiwan, Das said that the Taiwan crisis would have a "very, very, very negligible" impact on Delhi. India's bilateral trade with Taiwan is 0.7 percent of total trade.
"Capital flows in terms of FDI and other things are also very low. So, India is not going to be impacted with regards to what's happening or what is likely to happen in Taiwan," Das reckoned.
Bureaucrat-turned-Governor Das acknowledged the negative impact of the pandemic and the Ukraine conflict on the domestic economy, which has witnessed large portfolio outflows to the tune of $13.3 billion during the current financial year so far.
Although commodities prices and crude oil import bills
remain high, the governor expects that the export of goods and services together with remittances would "keep the current account deficit within sustainable limits."
Responding to a question if India can decouple from global peers, Das said Delhi has been impacted and will be impacted by the geopolitical crisis.
"[The] World is getting more fragmented in terms of trade, in terms of capital flow, and in terms of geopolitics. Perhaps the world is no more flat," he added.
The RBI raised the interest rate by 50 basis points on Friday, the third increase since May, in order to curb soaring inflation. Nevertheless, the RBI hopes the decreasing prices of commodities and crude oil will provide a cushion for the economy against the current inflation.