On eve of RBI policy announcement, economy shows promise

Tribune News Service

New Delhi, December 7

The Reserve Bank will, after a long time, get more elbow room while announcing its monetary policy on Wednesday as 19 of the 22 high frequency economic indicators are showing promise while the threat of the Omicron variant seems to be receding.

The 19 indicators have been higher over the past three months as compared to their pre-pandemic levels in 2019. Among the 19, there are some indicators whose recovery is way beyond 100 per cent, such as e-way bill by volume, merchandise exports, coal production and rail freight traffic.

“This suggests that not only is the recovery complete, economic growth is now gathering momentum over the pre-pandemic levels of output,” said Government sources.

These trends have been validated by estimates of GDP released on November 30 for the second quarter of the current fiscal.

The RBI will present its fourth bi-monthly monetary policy on Wednesday and is expected to keep repo and reverse report rate unchanged, keeping implications of the Omicron variant in view. Last year, two rate cuts had reduced bank interest rates to a record low of 4 per cent. Since then, rates have been unchanged.

However, there are challenges to be tackled by the RBI such as surplus liquidity in the system, elevated bond yields and uneven credit off-take.