Omicron Shadow- Relevance for UPSC Exam
- GS Paper 2: Indian Economy– Issues relating to planning, mobilization of resources, growth, development and employment.
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.
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.
The Editorial Analysis- Small Grant but a Big Opportunity for Local Bodies
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.
The Editorial Analysis- Births and Rights
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.
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