Reserve Bank of India Governor Shaktikanta Das has said that the economy is struggling to regain the momentum that had gathered in the second half of 2020-21 while stressing that the central bank would continue its policy support on growth amid the spread of the Covid-19 pandemic.

“There is still considerable slack in the economy. Domestic demand is picking up, but at a slow pace,” Das observed in the minutes of the recent monetary policy committee (MPC) meeting.

Das also emphasized on the need for closely monitoring the price situation with a view to anchoring inflation expectations.

"The need of the hour is twofold: first, continue the monetary policy support to the economy; and second, remain watchful of any durable inflationary pressures and sustained price momentum in key components so as to bring back the CPI inflation to 4% over a period of time in a non-disruptive manner," he said.

The MPC had, on 6 August, voted to keep the repo rate unchanged at 4%. The members of the MPC included Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Mridul K Saggar, Michael Debabrata Patra and Das.

All the members, except Varma, voted to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy.

RBI deputy governor Michael Patra said headline inflation may persist at current elevated levels at least through the second quarter of 2021-22 before easing in the third quarter when the kharif harvest arrives in markets.

RBI executive director Saggar said policy focus to revive growth on a durable basis needs to continue. Such a focus should entail consideration to avoid inflation risks that may emanate when credit demand improves, likely ahead of output gap closing. This arduous task needs to be carried out without endangering sustainable recovery in growth.

External member Goyal said the MPC has a difficult job as it battles both the slowdown and the inflation which the pandemic has triggered.

Even so, marginal moderation in inflation has twice this year provided just in time relief - pointing again towards supply-side causation and volatility, she said.

"A persistent rise in Indian fuel prices is at odds with inflation targeting," she said.

The government has mandated the RBI to ensure inflation remains at 4%, with 2 per cent margin on either side.