Weak private consumption demand and frail consumer sentiment remain a key challenge as we step into 2022. Sustained recovery in labour-intensive sectors such as construction and trade, hotels, tourism and other contact-based services together with government support for urban poor will be the key to overcoming this challenge.

The monetary policy will begin to normalise next year, handing the baton to fiscal policy, which needs to play a supportive role while engineering a calibrated reduction in deficits. All eyes on the Budget for this.

Double digit WPI inflation means continued rise in input costs. As these are passed on to consumers, prices will remain under pressure. Inflation will remain a key monitorable in 2022.

Surprises from the US Fed can make capital flows and currency volatile. While not immune, India can take succour from the fact that it is somewhat better placed to withstand monetary policy surprises from the US this time.

Then there is Omicron. While we are still learning about its transmissibility, virulence and the ability to dodge vaccines, it has certainly injected uncertainty into next year’s outlook.

The author is the Chief Economist with CRISIL Ltd