Reserve Bank of India (RBI) Governor Shaktikanta Das said on Saturday that the trifecta of deglobalisation, climate change and deeper penetration of technology appears to be the most anticipated trend for the future. As a result, the research department must be ready with multiple strategies to respond to these challenges.

“This can be potentially disruptive, requiring strategies to mitigate the associated risks,” Das said while speaking at the annual research conference of the RBI’s department of economic and policy research.

The aftereffects of the three shocks – pandemic, war and global inflation – are still unfolding and require constant monitoring. Such shocks have highlighted the challenges that emerging economies face, such as external sector sustainability assessment, feasible range of policy options to preserve sustainability and analysis of their effectiveness. “These challenges have cropped up because the nature and size of the spillover risk is very different now,” he added.

He emphasised on the need to rely on first-hand information rather than working with backward-looking models that run on old data in times of volatility, uncertainty, complexity and ambiguity (Vuca).

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Citing various examples of collecting first-hand information, Das said that the RBI conducted surveys of farmers and wholesalers during the pandemic to assess the its impact on food inflation. The apex bank is jointly working with Indian Council for Research on International Economic Relations (ICRIER) to develop a food inflation projection framework. Separately, at the time when the inflation target reset exercise was undertaken last year, the research department undertook a comprehensive review of the monetary policy framework, and recommended retention of the same target for the next five years, which was accepted by the central bank.

“From the standpoint of the Bank, research is increasingly becoming important to almost every major function, as a result of which research units have been set up in other departments. That process needs to be sustained and scaled up pro-actively,” Das said.

The RBI must internalise strategic medium to long-term research issues in its research agenda in order to identify structural policy changes that can raise the growth trajectory of the economy in a sustainable and inclusive manner, he said.

Speaking on the economy, he said that though the global economy faces the risk of hard landing due to the monetary policy tightening policy adopted by the advanced economies, especially the US, India is differently placed compared to its peers in the emerging market economies.

“Spillovers to EMEs, and to India, were in the form of capital outflows, depreciation pressures on currencies, reserve losses and imported inflation. Synchronised tightening of monetary policy globally has progressively increased the risk of a hard landing, that is, a recession to tame inflation. India is, however, differently placed,” Das said.