RBI to Take a Watchful Approach for Challenges & Opportunities from Brexit

Reserve Bank Governor Shaktikanta Das said the central bank will undertake policy responses after carefully weighing the challenges and opportunities with regards to developments around Brexit. He said there are consequential policy challenges for India which enjoys strong trade and investment relations with the UK and the EU.

India's external sector has remained resilient in recent period despite terms of trade losses due to the firming up of international crude prices and uncertain global demand conditions, the RBI governor said while speaking at Investors' Roundtable, 9th Vibrant Gujarat Global Summit 2019 here. With reference to Brexit, Das said Indian companies and policy makers need to suitably weigh challenges and accordingly re-strategise to respond appropriately.

As a few advanced economies are on the path of monetary policy normalisation, the RBI chief said there has been global portfolio rebalancing away from EMEs, including India.  Das also said while positive policy settings and continued macroeconomic stability helped contain India's external vulnerabilities, a close monitoring of external sector is required, given the sharp movements in global crude oil prices and global financial market volatility.

"These are the two global shocks that have implications for our CAD and financial flows," he said.  Uncertainties prevails over Brexit, after British MPs rejected the grand Brexit plan of British Prime Minister Theresa May earlier this week. She has called cross-party talks to put together a "Plan B" by Monday.

There are apprehension that the March 29 Brexit deadline could be pushed back give May more time to reach another deal or possibly call another referendum.