Reserve Bank of India (File image)
The Reserve Bank of India (RBI) said in an article in its November bulletin that the overall monetary and credit conductions are conducive for durable economic recovery to take root.
The article, titled ‘State of the Economy’, suggests the global economic outlook remains shrouded in uncertainty with headwinds from multiple fronts. In India, the recovery is gaining strength though the speed and pace of improvement remains uneven across different sectors.
According to the article, indicators of aggregate demand posit a brighter near-term outlook than before and on supply side, the Rabi season has set in early on a positive note on the back of a record Kharif harvest.
Manufacturing sector is also showing improvement in overall operating conditions, while services are in a strong expansion mode.
The article pointed out the economy is gradually healing amidst an uncertain and volatile global environment, battered by supply chain disruption, inflation shocks and geo-political tensions. High frequency indicators are showing recovery is taking hold in several spheres.
Further, the job market is exhibiting signs of exuberance on back of uptick in business optimism and faster pace of vaccination.
Among other indicators, India’s merchandise exports saw double-digit growth for the eighth consecutive month in a row. Collections under the goods and services tax (GST) marked their second highest level in October since its introduction, on the back of better tax administration and ongoing economic recovery, the article said.
Power consumption registered an uptick despite supply side constraints. Further, headline manufacturing purchasing managers’ index (PMI) recorded expansion for the fourth consecutive month in October with anticipation of an improvement in demand conditions.
The services sector is convalescing with the headline PMI rising to a decadal high in the same month, the RBI said in the bulletin.
Supported by the decadal-low interest rates, softening inflation and a modest current account surplus, the Indian economy is poised to regain the ground lost to the pandemic and re-emerge as among the fastest growing countries in the world, the article said.
The article highlighted that 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.
There is a risk of faster policy normalisation by major central banks leading to tightening of financial conditions and stifling of growth impulses, it added.
Overall monetary and credit conditions stay conducive for a durable economic recovery to take root, it added.