13/10/2016 6:15 PM IST | Updated 13/10/2016 6:59 PM IST

BRICS Countries Should Watch Out For 'Black Swan' Events: Urjit Patel

Patel also cited other challenges to BRIC economies

Shailesh Andrade / Reuters
The Reserve Bank of India (RBI) Governor Urjit Patel speaks with India's Finance Minister Arun Jaitley (R) at a seminar in Mumbai, India, October 13, 2016.

India and fellow BRICS countries need to be prepared to confront potential "political risk" events such as Britain's exit from the European Union and the U.S. presidential elections, Reserve Bank of India Governor Urjit Patel warned on Thursday.

Patel also cited other challenges such as a soft commodity cycle facing the global economy and the BRICS countries, composed of Brazil, Russia, India, China, and South Africa.

The RBI governor urged BRICS countries to respond by shoring up their domestic economies by making themselves attractive investment destinations.

Patel's speech in Mumbai was his first in public since his appointment as central bank governor in August. The media-shy policymaker addressed a group of BRICS officials ahead of a meeting of the five heads of government in the Indian state of Goa this weekend.

A similar warning

"The Brexit vote, the U.S. presidential election process, and the political realignment" in Europe were three of the potential "black-swan" scenarios that could impact BRICS policies, Patel said.

The warning against spillovers from global events was similar to the ones made by his predecessor Raghuram Rajan, a former chief economist for the International Monetary Fund widely respected by global investors.

Patel said India had already moved to improve its defences, through "measurable progress" in "price stability, fiscal rectitude, and sustainable current accounts".

The comments come a week after a six-member central bank panel headed by Patel voted unanimously to cut interest rates, raising the prospect that the central bank was willing to show tolerance for slightly higher inflation.

Turning to domestic matters, Patel, who shared a podium with Finance Minister Arun Jaitley, said India was facing gaps in providing skills to its workforce, adding "public investments have a key role to play in this regard""

The RBI governor added government initiatives such as "Make in India," intended to turn it into a manufacturing hub, would help in shoring up the workers' skills.

Rajan had been criticised by some government officials for appearing to cast doubt on the need to pursue "Make in India" in a 2014 speech questioning whether India should emulate China's export-driven growth strategy.

(Additional reporting by Devidutta Tripathy and Swati Bhat; Editing by Richard Borsuk)