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The prolonged restrictions and lockdown in some parts of the country could disrupt supply chains and cause inflationary pressures. The RBI issued this warning in its State of the Economy report.

India has recorded over 3.23 lakh fresh Covid-19 cases and 2,771 deaths in the past 24 hours .

The country's economic activity has held up well against the recent spike in COVID-19 cases. However, the rise in infections risks protracted restrictions and inflationary pressures, the RBI said in its monthly bulletin.

"It is noteworthy that economic activity in India is holding up admirably against COVID-19's renewed onslaught," the RBI said.

The central bank said it was important to entrench inflation at 4 percent. "When inflation goes beyond the comfort zone, the exclusive concern of monetary policy must be to bring it back to the target. When inflation is within the comfort zone, authorities can look to other objectives-the objective of control of inflation is not independent of the objective of growth, the report said.

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Free Press Journal