At a time when the government is claiming to recover from the Covid-19 impact, the Reserve Bank of India (RBI) has said that the impact of the pandemic may linger for more than a decade. The central bank says in its Report on Currency and Finance 2021-22 that India is expected to overcome Covid-19 losses in 2034-35. RBI has come to the conclusion taking the actual growth rate of (-) 6.6 per cent for 2020-21, 8.9 per cent for 2021-22 and assuming a growth rate of 7.2 per cent for 2022-23, and 7.5 per cent beyond that.
RBI says that the output losses for individual years have been worked out to Rs 19.1 lakh crore, Rs 17.1 lakh crore and Rs 16.4 lakh crore for 2020-21, 2021-22 and 2022-23, respectively. The pandemic is not yet over, says the Report. A fresh wave of Covid has hit China, South Korea and several parts of Europe. However, various economies are reacting divergently. In India, the restrictions are there only at the local levels.
The Report says that with the ongoing Russia-Ukraine conflict, the downward risks to global and domestic growth are getting accentuated through surges in commodity prices and global supply chain disruptions. The supply constraints and longer delivery times pushed up shipping costs and commodity prices, thereby intensifying inflationary pressures and threatening the nascent economic recovery across the world, including that in India.
A blueprint of economic reforms has been proposed in the Report. A feasible range for medium-term steady-state GDP growth in India works out to 6.5-8.5 per cent, consistent with the blueprint of reforms. Timely rebalancing of monetary and fiscal policies will likely be the first step in this journey. Price stability is a necessary precondition for strong and sustainable growth. Reducing general government debt to below 66 per cent of GDP over the next five years is important to secure India’s medium-term growth prospects.