Right frequency, FM's Mann ki Baat

Nirmala Sitharaman's call at the G20 emerging market economies meeting for coordinated action on post-pandemic recovery is timely, with the International Monetary Fund (IMF) lowering its forecast for global growth in 2022 from 4.4% to 3.6%. The IMF also cut its growth estimate for India in 2022-23 to 8.2% from 9%. The finance minister's view resonates with that of the fund in the World Economic Outlook for multilateral cooperation to end the Russia-Ukraine war, plug gaps between climate ambitions and actions, improve the resilience of global supply chains, and provide liquidity support during interest rate adjustments. The IMF sees a cycle of rising interest rates affecting fiscal sustainability, thereby delaying climate transition, which, in turn, makes economies vulnerable to commodity price shocks, ultimately feeding into inflation. A world fragmented by conflict increases overall volatility.

These themes are playing out in India as disruptions in energy supply have slowed down India's pivot away from coal, as Sitharaman pointed out. Yet, India is among a handful of countries that have fulfilled their climate commitments. The commodity cycle has elevated inflation, which could alter the course of interest rate adjustments, thereby affecting growth. The FM finds the inflation target has been breached, but not gravely.

Sitharaman also sought coordinated regulation of cryptocurrencies, emphasising the need for multilateral action in preventing their use in money laundering and financing terror. Since it imposed a tax on gains from crypto trading, India is evaluating regulation of digital assets. But it is correct in its assessment that unilateral action will be ineffectual. The IMF's Global Financial Stability report has sought international standards for digital assets in accordance with the activity they undertake, and the risks it entails. The fund has asked regulators to look into governance of crypto exchanges, risk concentration in digital assets, and the robustness and transparency of trading systems.