Mumbai, Nov 26 (IANS): Indian economy has exhibited stronger pick up in momentum of recovery than expected, said Reserve Bank of India Governor Shaktikanta Das on Thursday.

Addressing the 4th Annual Day of Foreign Exchange Dealers' Association of India (FEDAI), he cited that a multi-speed normalisation of activity in Q2FY21, after the country witnessed a sharp contraction in GDP by 23.9 per cent in Q1FY21.

"Even as the growth outlook has improved, downside risks to growth continue due to recent surge in infections in advanced economies and parts of India.

"We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the vaccine."

Besides, he said that monetary policy guidance in October emphasised the need to see through temporary inflation pressures and also maintain the accommodative stance at least during the current financial year and into the next financial year.

"A key source of resilience in recent months has been the comfortable external balance position of India supported by surplus current account balances over two consecutive quarters, resumption of portfolio capital inflows on the back of robust FDI inflows, and sustained build-up of foreign exchange reserves," he said.

"The Government's recent policy focus to enhance India's participation in global value chains, including through production linked incentives for targeted sectors, can leverage on the strong external balance position of India."