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Indian economy to witness substantial slack despite growth in FY22: RBI

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Mumbai: The Reserve Bank of India (RBI) said that the Indian economy will experience "substantial slack" in FY22, despite the positive growth and recovery from the current state.

Even with a 9.5% GDP growth in 2021-22, there will be substantial slack in the economy, said the RBI bulletin. It noted that the pressures may take some time to become more evident.

The RBI bulletin for July 2021 noted that the Indian economy is struggling to regain momentum. The recovery started in the second half of 2020-2021 was interrupted by the second wave of Covid-19, reported IANS.

The RBI stated that the pick-up in inflation is largely driven by adverse supply shocks due to disruptions caused by the pandemic, including increases in margins and taxes. There are also demand-supply mismatches in the case of food items.

The regulatory body noted that inflation ruled above the tolerance band during June-November 2020 and has again moved above the upper tolerance threshold in May and June 2021. It added that inflation will persist at these elevated levels for some months. The trend is likely to ease in the third quarter of 2021-2022 with the arrival of the Kharif harvest, said the IANS report.

The RBI Bulletin cited elevated international commodity prices, especially of crude, as part of the reason for cost-push pressures. "These factors should ease over the year as supply-side measures take effect. But more needs to be done," it added.

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TAGS:RBI Indian Economy Economic Degrowth 
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