Comments
The Indian economy is experiencing spillovers amid the ongoing geopolitical crisis even as it recovers from the third wave of the pandemic, according to an article in the Reserve Bank of India’s latest monthly bulletin.
“Amidst these testing times, India is making steady progress on the domestic front as it recovers from the third wave. India’s macroeconomic fundamentals remain strong. Unfolding global developments nevertheless pose downside risks in terms of spillovers,” RBI officials said in the article “State of the Economy”.
The authors said the Indian economy steadied in February 2022 after some moderation of pace in the preceding month when the third wave was at its peak. By March 15, however, the third wave receded sharply, with the 7-day average of daily infections plunging below 3,500.
Economy gaining traction has helped in rebuilding consumer confidence as reflected in the all-India Centre for Monitoring Indian Economy (CMIE) index of consumer sentiment, which rose to its highest level since the first wave of the pandemic across both urban and rural constituents, the authors said.
The article noted that consumer and business confidence are rising alongside improvement in demand conditions.
On the supply side, a resilient farm sector and a sustained retrieval in both industrial and services sectors are broadening the recovery.
Geopolitical crisis: Testing times
The authors underscored that global economic prospects are suffused with heightened uncertainty and clouded by downside risks from geopolitical conflict, with spillovers reverberating across the world.
This is happening at a time when countries are still reeling under the pandemic.
“The escalation of geopolitical risk, surge in crude oil prices and intensified volatility across global financial markets may smother the embryonic global recovery. This shock has also hit at a time when inflation is elevated in many countries,” the officials said.
Moreover, with monetary policy normalisation imminent, global financial conditions could tighten further.
At the receiving end are emerging market economies (EMEs), already reeling under currency depreciation, massive sell-offs by foreign portfolio investors and slowing growth, opined the authors.
The article emphasised that central banks across the world face a tough challenge of balancing the curbing of inflation against keeping the recovery on track.
With economic outlook mired in heightened uncertainty, risks to Emerging Market Economies have intensified as external conditions become increasingly less favourable, with capital outflows, global liquidity tightening and a worsening geopolitical environment,it added.
LIC IPO
The authors observed that LIC’s proposed IPO presents a fresh opportunity to deepen the equity markets’ reach further
“LIC’s huge policyholder base has the potential to bring large number of new investors to the capital markets who have historically relied on traditional saving products,” they added.
The authors highlighted that deepening of capital markets is also vital for divestment plans of the government, and therefore, it is important to inculcate investors’ trust in key market infrastructure institutions.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.