this situation changed suddenly and drastically with monetary policy adopting the stance of " higher for longer " rates to fight inflationary pressures, following the war in ukraine. such regime shifts in the presence of debt overhang in an environment of high interest rates and low growth raise concerns on macroeconomic stability in many countries. higher interest rates not only raise the interest servicing burden of heavily indebted countries but also impact the balance sheet of banks and financial institutions, as it was seen during the recent banking sector turmoil in advanced economies. in an extreme sense, high indebtedness of countries may constrain monetary policy due to sharp trade - off between price stability and financial stability. third, globalisation had boosted the global economy by enhancing productivity, creating global value chains and free movement of capital and labour across countries. the benefits of globalisation, however, had reached unevenly across countries. given the recent trends of geo - economic fragmentation, industrial and trade policies worldwide are undergoing a shift. several economies are now reshoring, nearshoring and friendshoring 1 their production processes on security and strategic considerations. consequently, there is growing trade fragmentation, technological decoupling, disrupted capital flows and labour movements. all of these do not portend well for an integrated global market for goods and services. fourth, from emerging market economies ( emes ) perspective, disruptions in trade flows in food, energy and critical industrial inputs due to recurring geopolitical flashpoints and disturbances in key trade routes are raising concerns for food security and macroeconomic management. moreover, in view of the volatility in financial markets and capital flows, these countries remain vulnerable to external shocks. in such an environment, creation of domestic buffers in terms of strategic reserves of critical commodities as well as a strong umbrella of forex reserves become imperative for the emes. fifth, macroeconomic models used by central banks so far have mainly focused on the demand side of the economy. enough emphasis was not given on supply side factors. the pandemic, followed by the war, and the resultant supply chain disruptions have brought in a sharp focus on the supply side. overlapping supply shocks, as we saw recently, led to persistent inflationary pressures even when aggregate demand was not unreasonably high. in this context, the role of governments in managing the supply - side 3 / 6 bis - central bankers'speeches or cost - push pressures on inflation has increasingly gained wider acceptance. going forward, a better understanding of the supply

shaktikanta das : fundamental shifts in the global economy - new complexities, challenges and policy options keynote address by mr shaktikanta das, governor of the reserve bank of india, at the 59th south east asian central banks ( seacen ) governors'conference, mumbai, 15 february 2024. * * * on behalf of the reserve bank of india, the current chair of the seacen ( south east asian central banks ) forum, i extend a warm welcome to governors of central banks and other delegates to this 59th seacen governors'conference. the weather in mumbai during this time of the year is pleasant and i hope you get some time for sightseeing. as everyone in this hall is aware, seacen plays a pivotal role in promoting collaboration, knowledge sharing and policy coordination among the member central banks, and thereby contributes significantly to the stability, resilience and sustainable development of the regional and the global economy. we are gathered here at a critical juncture when the international economic landscape is undergoing profound transformations. the prospects of a soft landing have improved for the global economy, but there are multiple challenges with uncertainties looming on the horizon. the theme of the conference " navigating economic headwinds and advancing financial inclusion : perspectives and challenges " aptly fits into the current policy dilemma that all central banks of the region face today. in these times, prudent macro - financial policies assume even greater importance for all of us to not only navigate through the current turbulence, but also to chart a course towards a more promising future. it is heartening to note that the economies in the region are making notable progress and are positioning themselves for continued advancement in the years ahead. there is a need for deeper integration in this region to stimulate economic growth and foster inclusiveness. i am sure the insightful discussions at this conference will offer some takeaways for our future policy making. i have chosen the theme " fundamental shifts in the global economy : new complexities, challenges and policy options " for my address today. first, i propose to speak about the resilience of the global economy in recent years in marked contrast to the earlier periods of crisis. thereafter, i propose to outline the emerging trends and shifts that are currently reshaping the global economy irreversibly and posing significant challenges for policymakers. finally, my effort would be to provide a macroeconomic overview of our region, followed by highlighting some policy choices for the future. resilience of