The Reserve Bank of India is positive on the future outlook of India. The central bank has said that the Indian economy is emerging from the second wave in a more resilient manner as compared to the first. The prospects are brightening for the Indian economy, said the RBI bulletin.
The central bank’s monthly ‘State of the economy’ report stated, “Aggregate demand is gaining firmer ground, while on the supply side, index for industrial production and core industries mirror improvement in industrial activity and services sector indicators point towards sustained recovery.”
According to the bulletin, the trajectory of inflation is shifting down more favourably than anticipated. "As pandemic scars heal and supply conditions are restored with productivity gains, a sustained easing of core inflation can be expected, which will reinforce the growth-supportive stance of monetary policy," the bulletin added. This means that the RBI remains hopeful of India gathering momentum in the near future, especially in the industrial activity and services sector.
Will Key Policy Rates Remain The Same?
It’s believed that resilient demand, improving core inflation and supply conditions will reinforce the growth supportive stance of the monetary policy. The MPC kept its key policy rate unchanged in the last monetary policy saying it will watch future data before arriving at a rate decision.
RBI deputy governor Michael Patra said the future course of monetary policy will be shaped by the evolution of growth and inflation. The central bank is still aiming to keep the interest rates lower until the credit demand is recovered and banks get back to their core function.
Reason Behind Optimism
With reopening of the economy and vaccination drive scaling up, the overall growth is catching up. The inflation is easing out and the rise in aggregate demand is resulting in higher GST collections. Railways freight has been impressive, demand for fast-moving consumer goods is surging and even retail sales of automobiles is increasing. All of these factors indicate brightening prospects for the Indian economy.
The future growth for India seems promising. The softening of various food items will contain the upside price pressure from fuel. The task now would be to consolidate these prices and take it forward. The outlook for core inflation is tied with the growth of the Indian economy. In that case, GDP and inflation data remains extremely crucial. Meanwhile, all RBI remains hopeful is for a sustained recovery, in order to keep inflation in check.
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