The global economic recovery appears to continue, buoyed by policy support. Near-term risks to the global economy due to a resurgence of COVID cases in some advanced countries are counterbalanced by the start of the inoculation drive in around 50 countries across the globe. India has also started its inoculation process amidst steady improvement in the COVID situation in the country. This is likely to provide a further fillip to the ongoing economic recovery. India’s budget for FY22 is also likely to be growth-oriented, focusing on a range of policies that offer continued support to the stressed segments of the economy and at the same time raising spending on building up infrastructure and supply chains. With the materialization of expected fall in inflation, the RBI now has breathing space to plan its unwinding emergency measures in a calibrated manner. We believe the unwinding of RBI’s emergency pandemic measures will be done gradually to avoid draining cash in a hurry amid a record government borrowing and still-fragile economic recovery. The accommodative monetary stance is likely to continue into at least the early part of FY22.
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