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The Editorial Analysis: Omicron Shadow

Omicron Shadow- Relevance for UPSC Exam

  • GS Paper 2: Indian Economy– Issues relating to planning, mobilization of resources, growth, development and employment.

The Editorial Analysis: Omicron Shadow_40.1


Omicron Shadow- Context

  • Recently, the Reserve Bank of India (RBI) in its latest bi-monthly monetary policy action, maintained the status quo on benchmark interest rates.
  • The RBI’s policy stance, as well as the full-year GDP growth and inflation projections, stems largely from a wariness of the risks posed by the Omicron variant of the novel coronavirus.

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Omicron Shadow- Key Factors affecting Domestic Outlook

  • The RBI governor said that ‘headwinds from global developments’ were the main risk to the domestic outlook, which was now “somewhat clouded by the Omicron variant of COVID-19”.
  • Private investment and private consumption- the key drivers of economic growth still lack meaningful momentum.
  • High Inflation: RBI’s continued stance on growth rather than stability may flame upside risks to long-term inflation and to inflation expectations.
    • The RBI’s November round of ‘Inflation Expectations Survey of Households’ shows that households expect inflation to accelerate in the near and medium-term.

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Omicron Shadow- RBI’s Stance

  • The Monetary Policy Committee (MPC) opted to continue with its growth-supportive ‘accommodative’ policy stance so as to enable a durable and broad-based recovery.
  • Reason: Prices of non-durable consumer goods, especially vegetables and other food grains, will decline with winter arrival, taming the inflation in the near term.
    • RBI also asserted that the ‘slack in the economy may limit the pass-through of cost-push pressures that have kept core retail inflation persistently high for 17 months.

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Omicron Shadow- Way Forward

  • Balancing stability and growth: RBI’s Monetary Policy Committee should balance these two as price stability remains the cardinal principle for monetary policy as it fosters growth and stability.
  • Though the RBI has begun to slowly tighten the liquidity spigot it opened in the wake of the pandemic last year, a more robust response to ward off price pressures must be taken.

The Editorial Analysis: Dynamism in India-U.S. ties


The Editorial Analysis: Dynamism in India-U.S. ties

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