Stabilisation fund can be a shock absorber

India's economic stabilisation fund is a timely initiative, and GoI can take credit for creating it without undue fiscal stress. The extra cushion against external shocks will come in handy while negotiating the crisis in West Asia. It helps to sequester the money when the economy is going through a period of robust growth and low inflation. A fund dedicated to tiding over temporary volatility in commodity markets frees up policy space for longer-term macroeconomic management. The anti-volatility fund will be a worthwhile addition to the countercyclical policy toolkit at a time when global shocks are rising to coincide with India's increasing exposure to them.

Since the beginning of the decade, GoI has had to negotiate a pandemic, energy and food shocks, as well as tariff wars. The incidence of external shocks is climbing as structural adjustments relieve domestic economic pressure. Improved welfare delivery and accelerated capex have made the economy more resilient, yet it still depends on imports for food, energy and manufacturing inputs. Rising productivity exposes the economy more to resource inadequacy, whether natural gas or rare earth minerals. A financial backstop is useful as the economy draws up its energy transition pathways.

Stabilisation funds have a successful record across the world, and India's experience is likely to be favourable. Principally, they address the need for risk mitigation without slackening fiscal discipline or threatening macroeconomic stability. They also complement efforts to develop storage infrastructure across commodities that make up a sizeable portion of India's trade with the world. Setting up the fund is, of course, the easy bit. Putting it to the best use takes some effort.