India’s central bank governor Thursday cautioned on the downside risk to the country’s economic growth due to recent surge in COVID-19 infections.
“We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the vaccine,” said Shaktikanta Das, governor of the Reserve Bank of India (RBI), addressing the 4th Annual Day of Foreign Exchange Dealers’ Association of India.
After witnessing a sharp contraction in gross domestic product (GDP) by 23.9 percent in April-June quarter of 2020-2021 and a multi-speed normalization of activity in July-September, the Indian economy has exhibited stronger than expected pick-up in momentum of recovery, the governor said.
India is experiencing a fresh surge of COVID-19 cases in the past few days after the festival of lights – Diwali following which the Indian government has extended the suspension of scheduled international commercial flights further till Dec. 31.
However, select international flights on limited routes will continue to run as per the specific approval granted by the aviation regulator.
Referring to India’s approach on capital account convertibility, the governor said that it will be a process, rather than as an event within a broad macroeconomic framework.