Continuing the accommodative stance

30 DEC,2021 | MEDC


 

The RBI has done well to continue with its accommodative stance for as long as necessary to revive and sustain economic growth. The economic effects of the rapid spread of the Omicron variant need to be carefully examined, and this uncertainty probably prompted RBI's continued policy support for a durable, broad-based and self-sustaining recovery. The RBI Governor has rightly pointed out that while our economy is on its way to achieving the projected growth of 9.5% in 2021-22, there are still major areas of concern. The key factor required to jumpstart economic growth on a sustainable basis – private consumption (constituting around 55% of aggregate demand) – continues to languish below its pre-pandemic level. This is not the time for RBI to indulge in any kind of calibrated tightening. Policymakers need to wisely analyse whether the global recovery has peaked prematurely, and act accordingly.

 

*Photo Credit: Google

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