The Reserve Bank of India (RBI) has said the domestic economy may need policy support for a longer period amid upbeat business expectations across capacity utilisation, demand and jobs, with improvement in financing and credit.
In its monthly report on the economy, the RBI warned the recovery was uneven and trudging through soft patches.
“Looking ahead from here, the main downside to the prospects for the Indian economy, abstracting from the pandemic, is the possibility of a sudden accentuation of global risks.”
“First, there are now clearer indications that the momentum of global growth is slowing, especially in the countries that were to be its key drivers,’’ the RBI said.
Retail sales spending, global car sales, industrial production and world merchandise trade have moderated, with shortages widening in key sectors such as semi-conductors and shipping.
Moreover, longer supplier delivery times are also holding back output in some industries, the RBI said.
Calling for the continuation of support, the RBI said the choice of policy mix will need careful consideration and sensitivity, keeping in mind the employment situation.