Liquidity normalisation is upon us

The path of the economy’s recovery over the past few months has validated the gradualist approach taken by the Reserve Bank of India (RBI). Growth prospects have brightened and inflation outlook has eased, despite lingering concerns as to potential broad-based supply shocks.
 
The latest Covid-19 wave is under control and the vaccination drive has reached warp speed — at the current pace, the country is on track to administer 1.7 bn jabs by the end of the year, which will cover a large majority of India’s eligible adult population. This backdrop sets the stage for the withdrawal of the