MPC Minutes: Omicron Variant Casts Shadow On Services That Were Showing Signs of Recovery, Says RBI Governor  

Global trade, after rebounding strongly in the first half of 2021, is losing momentum on the back of stretched supply chain and logistics issues, shortages of key components

Reserve Bank of India Governor Shaktikanta Das. Image: Getty

New Delhi: Reserve Bank of India (RBI) Governor Shaktikanta Das said that Indian economy is facing severe headwinds emanating from global factors, according to the minutes of monetary policy meeting released on Wednesday.  

In a statement, the governor said, “The supply disruptions and other bottlenecks which were earlier anticipated to resolve by end of this year have gained additional shelf life stretching into 2022. Global trade, after rebounding strongly in the first half of 2021, is losing momentum on the back of stretched supply chain and logistics issues, shortages of key components and slowdown in key regions. 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.”

Global trade, after rebounding strongly in the first half of 2021, is losing momentum on the back of stretched supply chain and logistics issues, shortages of key components and slowdown in key regions.

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.

The supply disruptions and other bottlenecks which were earlier anticipated to resolve by end of this year have gained additional shelf life stretching into 2022.

Das said, “There is growing uncertainty regarding the evolving global macroeconomic outlook. In 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. Given these uncertainties, continued policy support is warranted for a durable, broad-based and self-sustaining rebound, especially to nurture revival in sectors which are lagging and to safeguard those which are exposed to the evolving headwinds. In this scenario, it would be prudent to watch out for growth signals becoming well entrenched while remaining vigilant on inflation dynamics.”