RBI: India stands out amid hurdles in global recovery

NEW DELHI:  Overall monetary and credit conditions in India remain conducive for a durable economic recovery to take root, says the Reserve Bank of India in its latest State of the Economy report. It says that India is ‘differentiating’ itself from the global situation, which has been marred by supply disruption, stubborn inflation and surges of Covid-19 infections.

The central bank says that even as the global economic outlook remains clouded by uncertainty, there are many positives in the domestic economy. Among the positives that it enlisted include reduced infections and faster vaccinations, rapid improvement in mobility, recouping of the job market and strengthening of the overall economic activity.

The RBI, however, foresees multiple headwinds for afflicting the global economy at a time when many countries are still struggling with nascent recoveries. “There is a risk of faster policy normalisation by major central banks leading to tightening of financial conditions and stifling of growth impulses,” it says.

But the RBI is mindful of the inflation risk in India as well. It noted in its report that CPI inflation excluding food and fuel or core inflation remained elevated at 5.9% in October. The report says that high frequency food price data from the Ministry of Consumer Affairs, Food and Public Distribution (Department of Consumer Affairs) for November so far (1-12 November 2021) showed an uptick in cereal prices. 

According to the report, input costs pressures increased across manufacturing and services with cost conditions turning more adverse in manufacturing.