Analysts say India’s central bank may be delayed by three months in the beginning of normalization of monetary policy amid rising cases of COVID-19, but prohibiting the withdrawal of a stringent lockout will put any recovery on the economy. Not a significant threat, analysts say.
After seeing a peak of daily cases of around 100,000 at the end of September, the infection was on a steady decline, but has now started to rise again in the last month.
Radhika Rao, an economist at DBS Bank said, “More local and less stringent restrictions will impact the economic impact, pointing to the risk of the second wave due to the increase in current caseloads.”
DBS has retained its assumptions for a strong pickup in the March quarter to December 2020 quarter.
India reported 35,871 new coronovirus cases on Thursday, of which it is the highest in three months, with Maharashtra alone accounting for 65%.
Although analysts are unlikely to be quick to review their growth forecasts, many believe that a generalization of the policy may now take a backseat.
Ms. Rao said, “The normalization of monetary policy can be pushed back in a quarter as officials closely monitor developments.”
The RBI said in early January that it wanted to restore normal liquidity operations in a phased manner.
Nomura economists Sonal Verma and Arudip Nandi wrote in a note, “Growing concerns due to rising epidemic cases … may push back market expectations in times of policy normalization.”
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