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India's economic activity on cusp of strengthening revival, says RBI

Overall monetary and credit conditions stay conducive for a durable recovery for Indian economy to take root, RBI said (HT_PRINT)Premium
Overall monetary and credit conditions stay conducive for a durable recovery for Indian economy to take root, RBI said (HT_PRINT)

  • The Indian economy is clearly differentiating itself from the global situation, the RBI said, adding that the global economic outlook remains clouded by uncertainty with headwinds from multiple fronts at a time when many economies are still struggling with nascent recoveries

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Overall India's monetary and credit conditions stay conducive for a durable economic recovery to take root, the Reserve Bank of India said in its monthly bulletin released on Monday.

"Mobility is rapidly improving, the job market is recouping and overall economic activity is on the cusp of a strengthening revival," the RBI said in its chapter highlighting the state of the economy.

The Indian economy is clearly differentiating itself from the global situation, which is marred by supply disruptions, stubborn inflation and surges of infections in various parts of the world, the reserve Bank said, adding that the global economic outlook remains clouded by uncertainty with headwinds from multiple fronts at a time when many economies are still struggling with nascent recoveries.

"In India, the recovery gained strength though the speed and pace of improvement remain uneven across different sectors of the economy. Indicators of aggregate demand posit a brighter near-term outlook than before," it said.

The RBI said the domestic situation has brightened on the back of a considerable dip in the level of new Covid-19 infections and the rapid progress of vaccinations.

On the policy normalisation, the RBI bulletin noted that there is a risk of faster policy normalisation by major central banks leading to tightening of financial conditions and stifling of growth impulses, indicating that it is not going rush on monetary policy pullback anytime soon.

"On the supply side, the Rabi season has set in early on a positive note on the back of a record Kharif harvest and manufacturing is showing improvement in overall operating conditions, while services are in strong expansion mode," the RBI monthly bulletin said.

Recently, the Finance Ministry's monthly economic report noted that India is on its way to becoming the fastest growing major economy in the world, aided by rapid vaccination and improving coronavirus situation in the country.

This comes despite sluggish global economic recovery, impacted by prolonged supply constraints and input cost inflation, the FinMin reported said.

Rapid vaccination and teeming festivities will push India's ongoing recovery resulting in narrowing of demand-supply mismatches and greater employment opportunities. Armed with necessary macro and micro growth drivers, the stage is set for India's investment cycle to kickstart and catalyse its recovery towards becoming the fastest growing economy in the world, the report added.

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