Expansionary policies risky amid global inflation surge, warns NITI Aayog

India must exercise caution in deploying expansionary economic policies in the current global environment, according to NITI Aayog Vice-Chairman Ashok Lahiri, who warned that knee-jerk fiscal responses could prove counterproductive. Speaking against the backdrop of persistent inflationary pressures worldwide, Lahiri highlighted several structural challenges that policymakers need to navigate carefully.

The economist pointed to three key risks confronting the global economy. Rising inflation across major economies remains a significant concern, while climate phenomena like El Niño pose threats to agricultural output and commodity prices. Additionally, geopolitical uncertainty surrounding the Strait of Hormuz—a critical chokepoint for global energy supplies—adds another layer of complexity to the macroeconomic picture.

Lahiri's remarks suggest that Indian policymakers should prioritise targeted interventions over broad-based stimulus measures that could stoke inflation further. The caution comes as India continues to balance growth objectives with price stability, particularly given its exposure to global commodity price movements and international supply chain dynamics.

The NITI Aayog official's position underscores a growing consensus among economists that traditional expansionary tools may offer limited benefits in an environment where external shocks and inflation remain elevated. Any policy response must account for these structural constraints and external vulnerabilities affecting the Indian economy.