With the abating of the third COVID wave, India’s economic recovery is back on track. As expected, the impact of the third wave so far has been less than previous waves, and the rebound from the brief disruption is swift, as indicated by the high-frequency data. Fiscal and monetary policies remain supportive of nurturing a nascent economic recovery. However, global headwinds, including the rising geopolitical tensions, could pose downside risks. Compared to the RBI’s optimistic inflation projection for FY23, we see upside risks to inflationary pressures, given elevated global crude oil prices and domestic input price pressures, which may lead to a faster pace of policy normalization than presently anticipated.
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