India's overall economic activity remains strong despite facing headwinds from a rapid surge in Omicron infections, the Reserve Bank of India (RBI) said in its monthly bulletin for January 2022.
"Overall economic activity in India remains strong, with upbeat consumer and business confidence and upticks in several incoming high frequency indicators," it said.
"On the vaccination front, India has made rapid strides. On the Omicron variant, the recent data from the UK and South Africa suggest that such infections are 66 to 80 per cent less severe, with a lower need for hospitalisation. This has brightened near-term prospects and financial markets reflect this optimism."
Alongside, monetary and credit conditions are improving with bank credit picking up in a gradual but sustained manner, it said.
"As the world stepped into the new year, the path of the recovery in India as in the rest of the global economy encountered headwinds from a rapid surge in infections due to Omicron," the bulletin said.
"Nonetheless, amidst upbeat consumer and business confidence and an uptick in bank credit, aggregate demand conditions stay resilient, while on the supply front, rabi sowing has exceeded last year's level and the normal acreage."
Besides, the RBI said that manufacturing and several categories of services remain in expansion mode.
"More recently, expectations that Omicron may turn out to be more of a flash flood than a wave have brightened near-term prospects."
The RBI pointed out that aggregate demand conditions have stayed resilient. "The issuance of E-way bills - an indicator of freight movement - surged to 7.2 crore in December, the second highest in its history. This is indicative of the likelihood of robust collection of the goods and services tax (GST) in January 2022.
"With a strong pick-up in manufacturing and construction, highway toll collections soared by 16 per cent month-on-month in December. Power consumption rose by 4.5 per cent to 110.3 billion units in December."
It said that increase in mobility in December 2021 increased fuel consumption, with the consumption of petrol surpassing pre-pandemic levels. Additionally, aviation turbine fuel (ATF) and diesel consumption also exhibited sequential improvement though ATF still remains below the pre-pandemic levels.
On the supply front, the bulletin said: "On the supply side, aggregate supply, as measured by gross value added (GVA) at basic prices, increased by 8.6 per cent in 2021-22, as against a contraction of 6.2 per cent a year ago.
"The acceleration in GVA growth was facilitated by robust growth in agriculture, coupled with recovery in industry and in several constituents of services, albeit, on a favourable base."