NEW DELHI, October 18 (Reuters) – India’s central bank said on Monday that political support was needed longer for a lasting recovery of Asia’s third-largest economy after a coronavirus-induced slowdown, even as demand s ‘is straightened.
Earlier this month, the Reserve Bank of India’s (RBI) Monetary Policy Committee kept interest rates at record highs and reiterated the need to only lift pandemic-era stimulus measures gradually to help the nascent economic recovery.
“Premature tightening could lead to the stagflation that everyone fears, wiping out growth just as the economy recovers,” the RBI said in its monthly bulletin.
Perhaps the need of the hour is not to focus “so resolutely” on standardization but on supply-side reforms to alleviate bottlenecks, labor shortages and shortages. high commodity prices, especially crude oil, the central bank added.
India’s economy rebounded in the April-June quarter even as a devastating second wave of COVID-19 swept the country, growing over 20% year-over-year, driven by a sharp increase in manufacturing and higher consumer spending.
The central bank said global semiconductor shortages, high commodity prices and input costs, and potential volatility in global financial markets are downside risks to the domestic growth outlook.
The resurgence in edible oil prices in the recent period is also of concern, he said.
Reporting by Aftab Ahmed and Swati Bhat; edited by David Evans and Bill Berkrot
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