Analysis | RBI cites 'considerable uncertainty', fragility of recovery in holding rates

The slack in the economy, as well as the fact that activity, was still catching up, also made it contingent upon policymakers to continue to maintain policy support so as to ensure that recovery becomes durable and broad-based.

Reserve Bank of India Governor Shaktikanta Das on Wednesday emphasised that the “considerable uncertainty” on how the growth-inflation dynamics would pan out in the immediate months, coupled with the fact that ongoing economic recovery was “not yet strong enough to be self-sustaining and durable”, had undergirded the central bank's rationale in leaving interest rates unchanged and continuing with an “accommodative” policy stance.

“The recovery of aggregate demand hinges on private investment, which is still lagging,” . “The MPC regarded the accentuation of headwinds emanating from global developments as the main risk to the domestic outlook, which is now somewhat clouded by the Omicron variant,” he added.

The slack in the economy, as well as the fact that activity, especially private consumption – which is still below pre-pandemic levels - was still catching up, also made it contingent upon policymakers to continue to maintain policy support so as to ensure that recovery becomes durable and broad-based.