Policy normalisation path

RBI will need to do a tough balancing act

The Reserve Bank of India (RBI) did most of the heavy lifting in terms of providing support to the pandemic-ravaged Indian economy. It reduced policy rates and flooded the system with liquidity, which helped ease financial conditions. But that was in the past. As the economy is now recovering, the central bank will need to roll back emergency measures. In fact, policy normalisation would be a key objective for the monetary policy committee (MPC) and the RBI in the next fiscal year. The evolving macroeconomic conditions, however, could complicate policy choices for the central bank.

The MPC decided to leave