Though the economy has steadily gained momentum and remained resilient since the second quarter of the current fiscal, the Omicron variant of coronavirus remains the major challenge along with rising inflation pressures, says the Reserve Bank in its second financial stability report.
In the foreword to the report released on Wednesday, RBI Governor Shaktikanta Das notes that after the destructive second wave in April-May 2021, the growth outlook has progressively improved, though there are headwinds from global developments and more recently from the Omicron virus.
A stronger and sustainable recovery hinges on the revival of private investment and shoring up private consumption, which unfortunately remains below their pre-pandemic levels, he notes.
Admitting that inflation remains a concern as it is by the build-up of cost-push pressures, Das has called for stronger supply-side measures to contain food and energy prices.
Noting that the financial institutions have remained resilient amidst the pandemic and stability prevails in the financial markets cushioned by policy and regulatory support, the governor is confident that the strong balance sheets of banks with higher capital and liquidity buffers will help mitigate future shocks.
Quoting the stress tests on banks, the governor has also warned that gross NPAs may jump to 8.1-9.5 per cent by September 2022 from 6.9 per cent in September 2021.
The governor concluded by reiterating the Reserve Bank's resolute commitment to ensure a robust and efficient financial system that supports strong, sustainable and inclusive growth with macroeconomic and financial stability.
The report has come after the rating agency Icra report, released on December 28, stated that the country's real gross domestic product (GDP) is likely to maintain a 9 per cent growth rate in fiscal 2022 and 2023, amid concerns over the Omicron variant of COVID-19.
Icra Ltd Chief Economist Aditi Nayar had said, “We are maintaining our forecast of a 9 per cent GDP expansion in FY2022, with a clear K-shaped divergence amongst the formal and informal parts of the economy, and the large gaining at the cost of the small.
"Looking ahead, we expect the economy to maintain a similar 9 per cent growth in FY2023,” he added.