credit offtake

The recovery is spearheaded by an uptick in private investment through November-December alongside a turnaround in bank credit offtake and high Capex from the government sector (Centre and States).

Upbeat high-frequency indicators and consumer confidence show that the Indian economy continues to forge ahead, emerging out of shackles of the pandemic, said an article on the state of the economy published in RBI Bulletin on Wednesday. 

The recovery is spearheaded by an uptick in private investment through November-December alongside a turnaround in bank credit offtake and high Capex from the government sector (Centre and States).

In conjunction, the employment situation has brightened, said the article written by RBI officials. “The outlook remains upbeat, though concerns revolving around the spread of the new Omicron variant are surfacing,” it added.

The article further said indicators of aggregate demand point to sustained recovery across spheres, but with signs of sequential moderation. Even as E-way GST bills generation remained above pre-pandemic levels, there was some sequential dip in November on account of festive season fatigue in the first half of November.

However, E-way bills generation has picked up again in December (up to December 12) posting sharp month-on-month growth.

“The end of the festive season reflected in moderation in the growth momentum of petroleum consumption, led by a decline in diesel even as petrol consumption remained above pre-pandemic levels and aviation turbine fuel recorded a steady pick-up in November 2021,” the article said.

The RBI clarified that the views expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank of India.

The authors further said global supply chain and logistics disruptions continued to weigh heavily on the domestic automobile sector. The supply bottlenecks thwarted festive season sales of motor vehicles. The global economy remains hostage to heightened uncertainty, with Omicron sparking fresh containment measures.

The Indian economy bounced back strongly in the second quarter of 2021-22, with GDP surpassing its pre-pandemic levels, and inflation broadly aligning with the target. A host of incoming high-frequency indicators are looking upbeat and consumer confidence is gradually returning. Aggregate demand conditions point to sustained recovery, albeit, with some signs of sequential moderation, it said.

“The Indian economy continues to forge ahead, emerging out of shackles of the pandemic,” the article said. According to it, the ongoing revival is driven by a confluence of factors.

High-frequency indicators, include the sale of passenger vehicles, cargo movement, E-way bills, and PMI Index. Going forward, the authors said the emergence of the Omicron strain has heightened the uncertainty in the global macroeconomic environment, accelerating risks to global trade with the resumption of travel restrictions/ quarantine rules at major ports and airports.

(PTI)