RBI in no hurry to withdraw policy support

The latest activity data suggest that India's recovery has entered a slower phase, with global supply shortages starting to weigh on the economy too. In addition, India’s vaccination coverage remains low, leaving the economy exposed to the threat of further virus outbreaks. All of this underscores the need for the RBI to keep policy supportive. Indeed, the Bank said in its monthly bulletin this week that India “is still digging out of one of the deepest contractions to hit any major economy during the pandemic”. The report concluded that “policy support for a sustained and inclusive recovery may be needed for longer”. While further steps will be taken to gradually withdraw banking sector liquidity, we expect monetary policy to remain accommodative for several more months.