Possibility of supply shock turning into a demand shock in India must be monitored, RBI says

The Indian economy is giving mixed signals in the wake of the West Asia crisis, with some demand indicators remaining strong, while others weaken, and supply indicators starting to show signs of stress, the Reserve Bank of India noted in its latest analysis on the economy. It added that the possibility of the supply crunch turning into a demand shock in India in the future warrants “careful and continuous assessment”. 

In March, available high-frequency indicators of economic activity displayed divergent trends: demand conditions remained resilient, despite some pockets of slowdown in economic momentum,” the central bank noted in its latest State of the Economy report. “RBI’s forward-looking surveys pointed towards softening consumer confidence on the current situation and moderation in business optimism along with buildup of cost pressures.”