The Reserve Bank of India RBI said in its monthly bulletin for January that the economy in India remains strong despite the Omicron scare.
The central bank said that expectations that Omicron might turn out to be more of a flash flood than a wave have brightened near-term prospects, as stated in the section titled 'State of the Economy'.
As the world stepped into the new year, the path of recovery in India as well as the rest of the world economy encountered headwinds due to a surge in infections due to Omicron. Amidst rising consumer and business confidence and an increase in bank credit, aggregate demand conditions remain resilient, while rabi sowing has exceeded last year's level and normal acreage. It said that manufacturing and several categories of services are in expansion.
India's robust export performance in December reflects resilient demand for Indian goods, despite the fact that there has been a moderation in some sectors since December. The RBI said that imports surged on the back of improvement in domestic demand.
In January, the mobility indicators showed a sequential moderation due to rising COVID 19 cases. Aggregate demand conditions stayed resilient, with theissuance of E-way bills, an indicator of freight movement, surged to 7.2 crore in December, the second highest in its history.
The fiscal position of the RBI continued to improve, with net tax revenues touching an all-time high of 73.5 per cent of budget estimates BE and the gross fiscal deficit falling to 46.2 per cent of BE during April-November 2021, as opposed to the five-year average of 50.6 per cent and 112.5 per cent, respectively. The bulletin also highlighted the increase in GST collection and improvement in state finances.
The bulletin said that it remains clouded by considerable uncertainty and that it remains clouded by the global outlook. Inflation continues to mount across geographies despite disruptions in production, supply chains and transportation, increasing the divergence between monetary policy stances across jurisdictions.
There are indications that supply chain disruptions and shipping costs are slowly easing, although the waning of inflation may take longer. This provides a window of opportunity to focus all energies on accelerating and broadening the global recovery. The Indian economy has seen upticks in several incoming high frequency indicators along with strong consumer and business confidence. In addition to that, vaccination has increased rapidly in the country.
Recent data from the UK and South Africa indicates that such infections are 66 to 80 per cent less severe, with a lower need for hospitalisation. It concluded that this optimism has brightened the near-term prospects and financial markets.