Will respond quickly to any adverse development due to global turmoil: RBI

MUMBAI: The Reserve Bank today said it would deploy all available tools to respond "rapidly and appropriately" to any adverse development due to "turbulent" global situation which could have an impact on India's growth.

"... recognising that the global situation is turbulent, the Reserve Bank stands ready to use all available instruments and measures to respond rapidly and appropriately to any adverse development," Reserve Bank of India (RBI) said in its mid-quarterly review.

The RBI's observations comes in the backdrop of turmoil in eurozone economies and its impact, which will dominate the agenda of a G-20 summit that begins in Mexico today.

Worries over debt-crisis in Italy and still Spain still loom large even as election victory by pro-austerity parties eased fears of a Greek eurozone exit and brought relief to world markets.

Pointing out that eurozone sovereign debt problem has continued to weigh on the global recovery, RBI said "renewed concerns have arisen about a sustainable solution to the sovereign debt problem and the increasing vulnerability of the banking sector. Consequently, risk aversion has increased."

The apex bank also noted that recovery in the US economy is weakening, while growth in major emerging and developing economies (EDEs) has been moderating.

"While slowing global growth has dampened commodity prices, heightened risk aversion and the resultant slowing of capital flows will have a significant adverse impact on EDEs, including India," RBI said.

"Also, should there be an event shock, central banks in advanced economies will likely do another round of quantitative easing. This will have an adverse impact on growth and inflation in EDEs, particularly on oil importing countries such as India, through a possible rebound in commodity prices.