The Reserve Bank of India Governor Shaktikanta Das said that the Indian economy is facing several headwinds from global factors and that Omicron may derail ongoing demand recovery.
The Monetary Policy Committee had unanimously voted for the status quo on policy rates for the ninth consecutive time. The meeting was conducted soon after the latest Omicron variant of coronavirus started spreading across the globe.
The emergence of the Omicron variant may cast some shadow on the momentum of contact-intensive services that were just showing signs of recovery in recent months. The threat of Omicron is also imparting additional volatility to the financial markets.
He further said that on the domestic front, even as the prospects for economic activity are improving, there is still a slack with key drivers like private consumption remaining well below their pre-pandemic levels.
"As countries race to contain Omicron with travel restraints and new quarantine and social distancing measures, the global recovery and the inflation outlook are at risk again," he said.
While the Indian economy is on its way to achieve the projected growth of 9.5 percent, there are still significant areas of concern. Private consumption, the mainstay of aggregate demand with a share of around 55 percent, is declining its level recorded two years ago. Private investment remains timid and is yet to participate in the recovery.
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