Mumbai: Inflation and COVID-19 new variant Omicron pose major challenges to the Indian economy, the Reserve Bank of India (RBI) said on Wednesday.
In the Reserve Bank’s latest Systemic Risk Survey (SRS), all broad categories of risks to the financial system – global; macroeconomic; financial market; institutional; and general – were perceived as ‘medium’ in magnitude, but risks arising on account of global and financial markets were rated higher than the rest. “Commodity prices, domestic inflation, equity price volatility, asset quality deterioration, credit growth and cyber disruptions were rated as the major risks,” according to the 24th issue of the Financial Stability Report (FSR) released by the RBI.
The central bank noted that the global economic recovery has been losing momentum in the second half of 2021 in the face of resurfacing COVID-19 infections, the new variant Omicron, supply disruptions and bottlenecks, elevated inflationary levels and shifts in monetary policy stances and actions across advanced economies and emerging market economies.
On the domestic front, progress in vaccination has enabled the recovery to regain traction after the debilitating second wave of the pandemic, notwithstanding signs of slowing pace more recently; the corporate sector is gaining strength and bank credit growth is improving.
The Financial Stability Report (FSR) is published bi-annually and includes contributions from all the financial sector regulators. Accordingly, it reflects the collective assessment of the Sub Committee of the Financial Stability and Development Council (FSDC-SC) on risks to financial stability.
