According to an article published in the RBI Bulletin on Tuesday, improving infrastructure, ensuring low and stable inflation, and maintaining macroeconomic stability are important for reviving and enhancing animal spirits.
The article titled ‘State of the Economy’ mentions that the Indian economy has consolidated its recovery, with most of the components surpassing pre-epidemic level activity.
High global risks posed by weakened growth, high inflation, supply disruptions due to geopolitical spillovers, and volatile financial markets due to synchronized fiscal constraints create short-term challenges.
“India faces the challenge of recovering from the scourge of epidemics through greater investment in the health and productivity of human capital,” the article said.
The central bank, however, said that the views expressed in the article did not represent the views of the authors and not necessarily those of the Reserve Bank of India (RBI).
Further, it says that as the pace of digitalisation accelerates, the footprint of the unicorn ecosystem in India is expanding, reflecting a rapidly changing economy.
“In order to achieve high growth on a sustainable basis, the government needs to encourage private investment through high capital expenditures that crowd out private investment,” it says.
As the geopolitical tensions persist, commodity prices continue to rise and the pace of financial housing withdrawal accelerates, the outlook for global growth is alarming, the article noted.
According to the article, emerging economies face the risk of capital outflows and higher commodity inflation feeding on the print as the epidemic continues to hit near-term economic prospects.