India's overall economic activity remains strong, driven by upbeat consumer confidence and an uptick in bank credit, and expectations that Omicron may turn out to be a "flash flood rather than a wave" have further brightened the prospects, according to an RBI article.

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"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 percent less severe, with a lower need for hospitalisation," the article on the state of economy published in the RBI Bulletin said on Monday.

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, it noted.

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Noting that manufacturing and several categories of services remain in expansion, the article said, "Overall economic activity in India remains strong, with upbeat consumer and business confidence and upticks in several incoming high-frequency indicators". "Expectations that Omicron may turn out to be more of a flash flood than a wave have brightened near-term prospects," it said.

The central bank said the views expressed in the article are those of the authors and do not necessarily represent the views of the Reserve Bank of India (RBI). There are indications that supply chain disruptions and shipping costs are slowly easing, although the waning of inflation may take longer. This provides a window of opportunity to focus all energies on accelerating and broadening the global recovery, the article said.

It also said that data for early January 2022 (up to January 12) indicate growth in digital payments, although the recent surge in infections "may pose a concern going forward". Nevertheless, the payment industry is expected to display resilience owing to the availability of varied checkout options and rising digital. Market estimates predict that the value of digital payments could jump three-fold from USD 300 billion in 2020-21 to USD 1 trillion by 2025-26.

First Published:Jan 17, 2022 7:10 PM IST