RBI on Indian Economy: Budget 2022 proposals, recent monetary policy set tone for revival

The 2022-23 Budget proposals and the recent monetary policy announcements have set the tone for a durable and broad-based economic revival which has started gaining traction as the nation emerges from the third wave of the COVID-19 pandemic, according to an RBI article.

The RBI article on the 'State of Economy' also emphasised that the domestic economic situation continues to improve, the unsettled global environment notwithstanding.

"The Union Budget 2022-23 and the monetary policy announcement of February 10, 2022, have set the tone for a durable and broad-based revival," said the article published in RBI's February bulletin.

The renewed emphasis on public investment in the Budget through infrastructure development is expected to crowd-in private investment and strengthen job creation and demand in 2022-23, it said.

"Fundamental to the infrastructure boost is the GatiShakti National Master Plan, which aims to achieve inclusive growth through multi-modal connectivity and logistics efficiency," the article said.

Observing that domestic macroeconomic conditions are striking a path that is diverging from global developments, the article said, "in India, the recovery in economic activity is gaining strength and traction as it emerges from the third wave.

"Both manufacturing and services remain in expansion with optimism on demand parameters and uptick in consumer and business confidence. As businesses return to a new normal, the job landscape is expected to improve," it said.

It further said that today, the global economy stands at an inflection point. Inflation has become entrenched across economies, owing to a spike in commodity prices and persistence of supply chain bottlenecks.

"The global macroeconomic situation remains embroiled in a heightened state of uncertainty, with risks tilted to the downside," the article added.

With inflation projected to stay within the tolerance band in 2022-23, the Monetary Policy Committee (MPC) decided to pause and persevere with an accommodative policy stance. RBI Governor Shaktikanta Das emphasised that monetary policy would continue in its endeavour to achieve price stability, while ensuring a strong and sustained economic recovery.

Higher spending and ease of doing business have brightened the outlook. India has once again emerged as the fastest growing economy among the major economies of the world according to the IMF," the article said.