Regional Cooperation could be a win-win for all countries in the South Asian Region, said the Reserve Bank of India Governor Shaktikanta Das in his speech at the International Monetary Fund (IMF) Conference on South Asia’s Path to Resilient Growth on January 6 while highlighting six key policy priorities for the South Asian region.
In recent years, multiple shocks have dampened the economic prospects of the South Asian region. Some countries have also been dealing with ramifications of unsustainable debts, and seeking IMF facilities. India, Bangladesh and Maldives will be the fastest growing economies in the world in 2022-23 as per IMF, said Das.
“Despite the positives towards the potential in the South Asian Region there are certain policy challenges that the South Asian region faces which have been accentuated because of the impact of the COVID-9 pandemic, the spillover from the war in Ukraine, globalisation of inflation, financial market tightening that is happening all over the world and simultaneous tightening of monetary policies,” said Das.
What are the six policy priorities in the South Asian Region as per RBI Governor Shaktikanta Das?
Taming Inflation
Das said that during the first three quarters of 2022 food price inflation in the South Asian region averaged more than 20 percent and the region's heavy dependence on imported fossil fuels made it vulnerable to imported fuel inflation.
Hence for successful disinflation as per Das credible monetary policy actions accompanied by targeted supply-side intervention trade policy and administrative measures have become the key instruments.
“While the recent softening of commodity prices and supply chain bottlenecks should help in lowering inflation. If inflation persists at high levels, prioritising price stability may therefore be the optimal policy choice for the South Asian region,” he added.
He further mentioned that this approach in the current context however needs to be mindful of the rising list to growth Outlook in an environment of deteriorating prospects for global growth and trade Activity.
Containing external debt vulnerabilities
External debt in South Asian economies after the pandemic surged to USD 9.3 trillion in 2021 from 8.2 trillion in 2019, an increase of 1.1 trillion.
Das mentioned that the increasing reliance on private creditors has raised that service cost and complicated greater coordination in debt resolution efforts.
He mentioned that with increasing reliance on private creditors the the role of multilateral organisations particularly the IMF and World Bank becomes crucial in making debt treatment efforts more effective.
“strengthening the mechanism of recording reporting and analysis of data so as to enhance transparency and preserve debt sustainability is important,” said Das
Raising productivity
Das mentioned that while sustained and broad-based economic recovery remains the current policy focus, it is necessary to undertake deep structural reforms. This will help raising potential growth trajectories of the economy in the South Asian region.
Under raising productivity, according to Das , there are certain specific areas of policy priorities:
Strengthening cooperation for energy security
The South Asian region has high reliability on fossil fuels and imported energy making it vulnerable to volatility in oil, gas and coal prices, said Das.
Keeping this in mind the South Asian Region needs to strengthen energy cooperation arrangements for building resilience to external shocks.
In this India and Bangladesh have already signed an agreement in September 2022, to enhance sub-regional connectivity in the energy sector by connecting power grids of two countries synchronously.
Cooperation for greener economy in the region
Das mentioned that as South Asia is one of the most vulnerable regions to climate change hence there are investment requirements in renewable energy, greening the vehicle fleet and making future building stock green and resilient to climate change.
Promotion of tourism
Tourism has a huge potential in the South Asian region, driving the GDP of many countries. Das mentioned that religious tourism, medical tourism, spiritual tourism and adventure tourism can aid the sector and make it touch the pre-pandemic levels.
Further policies in tourism are also required as its a sector with huge employment opportunities.
In his address Das also mentioned that the greater intra-regional trade in the South Asian region can enhance opportunities for growth and employment.
"At the central bank level a key dimension for cooperation has been learning from each other on common goals and challenges... Rupee settlement of cross-border trade and CBDC, where the RBI has already started moving forward, can also be areas of greater cooperation in future," Das said.
Also read: World Bank report suggests 'greening of taxation' to South Asian economies; all you need to know
(Edited by : CH Unnikrishnan)
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