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India's economy may be healing but it is still digging out of one of the deepest contractions to hit any major economy during the pandemic, the Reserve Bank of India (RBI) said in its monthly bulletin.

The RBI Bulletin for October 2021 noted that India was amongst the first hit and our recovery started late, towards October-November 2020.

"In the second wave, we did not impose a nationwide lockdown, but daily infections at over 400,000 were at that time the highest in the world and it clearly moderated the recovery that was underway till then."

"Consequently, policy support for a sustained and inclusive recovery may be needed for longer. In particular, the choice of policy mix will need careful consideration and sensitivity as it is expected that employment may weigh on the recovery, with people having lost incomes and jobs, and those that have jobs have lost purchasing power."

The bulletin, however, noted that hiring prospects have already brightened-up ahead of the festivals, with entry level hiring growing at the fastest pace.

"The IT sector is the leader in terms of the intent to hire, followed by education services, healthcare, and pharmaceuticals. India will need policies that channel these energies to regain the demographic dividend. We can do it - recent outlook upgrades cite India's strong fundamentals, the receding risks of a negative feedback between the real economy and the financial system, high capital cushions and ample liquidity."

"The time is right for setting India on a new trajectory of sustainable and inclusive growth. After all, October marks the ending and beginning of things, a symphony of permanence and change."

In addition, the bulletin pointed out that the Monetary Police Committee's call on inflation has turned out to be correct, with the softer than expected food prices providing the impetus for a further disinflation of the headline to a closer alignment with the target.