Low and stable inflation is essential to stimulate growth: RBI article
According to an article published Tuesday in the RBI Bulletin, improving infrastructure, ensuring low and stable inflation and maintaining macroeconomic stability are essential to rekindle animal spirits and stimulate growth.
The article titled “State of the Economy” notes that the Indian economy has consolidated its recovery, with most constituents exceeding pre-pandemic activity levels.
Heightened global risks from weaker growth, high inflation, supply disruptions due to geopolitical fallout, and financial market volatility from synchronized monetary tightening pose near-term challenges.
“India faces challenges to build from the scars of the pandemic through greater investment in health and human capital productivity,” the article said.
The central bank, however, said the opinions expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank of India (RBI).
Further, he said that with an accelerating pace of digitalization, the footprint of the unicorn ecosystem in India is expanding, reflecting a rapidly changing economy.
“In order to achieve a higher growth trajectory on a sustainable basis, private investment must be encouraged by higher capital expenditure by the government which attracts private investment,” he said.
The outlook for global growth looks bleak as geopolitical tensions persist, commodity prices remain high and the withdrawal of monetary easing gathers pace, the article noted.
Emerging economies face risks from capital outflows and rising commodity prices that feed into inflation as the pandemic continues to affect near-term economic prospects, according to the article.