‘Recovery Is Underway In Spite Of Headwinds’, RBI Says In Annual Report 2021-22

RBI Annual Report 2021-22: According to the report, there are several factors that are dampening the spirit of economic recovery. However, India is well-poised to recover and is on the right path.

New Delhi: The Reserve Bank of India (RBI) released its Annual Report for 2021-22 on Friday. The central bank stated that the recovery of the country, post-Covid is underway ‘in spite of headwinds’. The report stated that in order to improve the growth potential of the economy, structural reforms will have to be taken. This becomes especially significant for the middle-class who are coming out of the Covid-19-induced shock.

The report noted, “The year gone by brought many challenges, but a recovery is underway in spite of headwinds. The future path of growth will be conditioned by addressing supply-side bottlenecks, calibrating monetary policy to bring inflation within the target while supporting growth and targeted fi scal policy support to aggregate demand, especially by boosting capital spending.”

Emphasis On PLI Scheme, Green Hydrogen Policy

The report talked about the role, the PLI scheme can play in helping India recover from the impact. It noted, “The PLI scheme for sectors such as electronics, pharmaceuticals, textiles, steel, and automotive are expected to enhance India’s global value chain (GVC) participation and reduce import dependency in critical sectors.

It stated that the supply chain disruptions can be eased if the geopolitical tensions ease. It continued, “This could enhance India’s growing agricultural exports. Efforts are also being made to boost India’s defence exports. The recently announced Green Hydrogen/Green Ammonia Policy would secure India’s energy security in an environmentally sustainable way and cut down dependence on fossil-based imports.”

Underlying Risks

RBI’s annual report also talked about the risks that may continue to underwhelm the global growth prospects. Supply chain issues and high global inflation were among the top concerns noted by the bank.

It stated, “Longer-than-expected supply chain bottlenecks, elevated freight rates and the upsurge in global inflation amidst escalating geopolitical tensions pose significant risks. Although direct trade and fi nance exposures in the context of the ongoing confl ict are limited, elevated crude oil prices can widen the current account deficit while foreign portfolio investors may remain risk averse towards EMEs, including India.”