Mumbai, May 27 (KNN) The Indian economy is expected to recover despite the challenges and problems due to global risks, said the Reserve Bank of India (RBI) in its latest annual report.

The central bank has said that it will follow a nuanced approach in the wake of inflation risks emanating from high commodity prices.

While it will ensure adequate liquidity in the banking system to support the need of the productive sectors of the economy, said the apex bank on Friday.

“The future path of growth will be conditioned by addressing supply-side bottlenecks, calibrating monetary policy to bring inflation within the target while supporting growth and targeted fiscal policy support to aggregate demand, especially by boosting capital spending,” said the document.

It also underlined the inflation will be impacted by geopolitical aftershocks, with close to three-fourths of the consumer price index at risk.

“The elevation in international prices of crude, metals, and fertilisers has translated into a terms of trade shock that has widened trade and current account deficits,” it said.

RBI decided to change its focus to control inflation as the geopolitical situation worsened situation after Russian invasion of Ukraine.

Since the outbreak of covid-19 pandemic the central bank’s chief objective was to support growth. Earlier this month, the six-member monetary policy committee of the central bank increased the repo rate – for the first time in 4 years – by 40 bps to 4.4 per cent.  (KNN Bureau)