The Indian economy continues to tread along its path of recovery, but headwinds are rising amidst the new COVID variant (Omicron) and global developments. The progress on vaccination should help India face Omicron, provided vaccines remain effective. After a robust sequential recovery in the Q2 FY22, the economic recovery gathered pace during the festival period, but early data for Nov-Dec has been mixed. The government’s favorable fiscal position provides it with the flexibility to boost support to the economy. In its December meeting, the RBI continued to prioritize economic growth revival and deferred policy normalization amidst rising global uncertainty. The RBI is expected to start the policy normalization in the form of a reverse repo hike in the February meeting. A new COVID wave could delay that.