Prospects Brightening for Economy As Second Covid-19 Wave Wanes: RBI


RBI said that the inflation trajectory is shifting down more favourably than anticipated.

New Delhi: The Reserve Bank of India (RBI) on Thursday stated that prospects are brightening for the economy achieving escape velocity from the Covid-19 pandemic as the second wave wanes. The central bank, in its monthly bulletin, mentioned that the preparedness for the future remains on war-alert status. Commenting on the state of economy, it said, “Aggregate demand is gaining firmer ground, while on the supply side, IIP and core industries mirror improvement in industrial activity and services sector indicators point towards sustained recovery.”

The Reserve Bank also said that the inflation trajectory 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 RBI’s bulletin noted.

Consumer inflation rate in August eased to 5.30% from July’s 5.59% rate.

“The softening of prices of various food items is likely to extend into Q3 and contain the upside price pressures stemming from fuel and core prices on headline inflation. The task now is to consolidate these gains and carry them forward into Q4 as well,” RBI further said in its September bulletin.

Earlier in the day, RBI Deputy Governor Michael Patra said that India’s inflation is likely to ease only gradually. He added that the outlook on growth and inflation will help determine the future course of central bank’s monetary policy.

Mr Patra stated that the economy is emerging from the second Covid wave in a more resilient manner as compared with the first one.

The Monetary Policy Committee (MPC) of the RBI had voted unanimously to keep the policy repo rate unchanged at 4% in August.

Separately, the Reserve Bank on Thursday also released its annual publication titled “Handbook of Statistics on the Indian Economy, 2020-21” (HBS). This publication, the 23rd in the series, disseminates time series data on various economic and financial indicators relating to the Indian economy.

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