Zurich [Switzerland], May 13 (ANI): Noting that India has started witnessing the impact of global disruptions caused by the West Asia conflict, RBI Governor Sanjay Malhotra has said that the government has so far absorbed a significant part of the burden, but if the situation continues, it is likely to pass on some of the price increase to consumers.

Speaking at the 12th High-Level Conference on the International Monetary System, jointly convened by the International Monetary Fund and the Swiss National Bank, the RBI Governor referred to the sharp increase in the international price of crude and said the government has so far absorbed a significant part of the burden by keeping pump prices of petrol and diesel unchanged, reducing duties and allowing only marginal increases in some controlled prices such as gas.

He indicated that the current situation may not be sustainable indefinitely if disruptions persist further.

'But if this is to continue for a longer period of time, it's already, you know, about 75 days... I believe that the government, it's, you know, it's a matter of time that the government will actually pass on some of these price increases,' he said.

Malhotra also said the government has remained fiscally prudent and continued on the path of fiscal consolidation, bringing down the fiscal deficit from 9.2 per cent of GDP during the pandemic period to nearly 4.3 per cent.

The RBI Governor said monetary policy frameworks remain important during such periods as they help anchor inflation expectations, but acknowledged that monetary policy alone may not be sufficient to tackle major supply-side shocks.

Highlighting the broader global environment, Malhotra said central banks have become increasingly accustomed to operating amid uncertainty.

He said monetary policy regularly deals with uncertainties related to economic models, changing behaviour patterns and incoming data, and therefore policymakers must focus on robustness and caution instead of pursuing extremely precise policy responses during periods of heightened uncertainty.

He added that gradualism, policy communication and central bank independence become even more important in such situations to maintain credibility and anchor inflation expectations.

Referring to India's vulnerability to supply shocks, the Governor said the country remains particularly exposed because food still accounts for nearly 40 per cent of the CPI basket, despite a reduction from about 46 per cent after the latest revision.

Malhotra said that while temporary and transitory supply shocks can sometimes be looked through, policymakers must intervene if second-round effects begin spreading across the broader economy and inflationary pressures become generalized.

Malhotra also highlighted India's deep economic dependence on the Middle East at a time when the region is facing heightened geopolitical tensions. He said one-sixth of India's imports originate from the region, while one-sixth of exports are directed there.

Additionally, around 40 per cent of remittances, 40 per cent of fertiliser imports and nearly 60 per cent of gas supplies are linked to the region, making India highly exposed to developments there.

He said that in such an environment, monetary policy has to remain highly flexible, agile and nimble in responding to rapidly evolving global and domestic conditions. (ANI)