The RBI on Tuesday said the economy has proved to be resilient in the face of the onslaught from the third wave of the pandemic.
In its January report on the state of the economy, the apex bank said the overall economic activity remained strong amid upbeat consumer and business confidence and uptick in several high frequency indicators .
The report said the near-term prospects have brightened on expectations the Omicron virus may turn out to be more of a “flash flood than a wave’’.
The report was prepared by the RBI’s Department of Economic and Policy Research. The central bank said the views in the report were those of the authors.
On the supply front, area sown under the rabi (winter) crop is both greater than the average and last year’s levels.
Further, manufacturing and several categories of services remain on an expansion mode.
“With the recovery unevenly gaining traction, all the constituents of aggregate demand entered into expansion, with investment, exports and imports exceeding their pre-Covid levels,’’ the report said.
Industrial and services activity has exhibited a “halting recovery” even as services are yet to catch up with their 2019-20 levels.
India’s robust export performance in December reflected the resilient demand for its goods, while imports surged on the back of an improvement in domestic demand.
The growth in bank credit is indicative of signs of a gradual recovery, led by the retail segment. But flow of credit to the lower-rated corporates remains hesitant.
The report cautioned that the global outlook remained clouded by considerable uncertainty. Inflation continues to rise across geographies amid disruptions in production, supply chains and transportation.
This has led to the widening of the divergence between monetary policy stances across jurisdictions.
However, there are indications that the supply chain disruptions and shipping costs are slowly easing, though the softening of inflation may take longer.
The document said Covid-19 had severely dented consumer confidence in India.
