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rbi: 12 years to overcome Covid losses: RBI


MUMBAI: The Reserve Bank of India (RBI) expects the Indian economy to overcome losses arising out of the pandemic only by 2034-35. The output losses on account of the pandemic are estimated to be over Rs 52 lakh crore over the last three years.
In its first detailed analysis of the impact of the pandemic, the RBI published a report ‘Scars of the pandemic’ in its annual publication on currency and finance. According to the report, the capital expenditure push in the FY23 Budget can help achieve sustainable high growth by enhancing productive capacity, crowding in private investment and strengthening aggregate demand. While private consumption expenditure and investment marginally surpassed their respective pre-pandemic levels in FY22, the RBI said there is a need to strengthen the growth momentum to compensate for the lost output.
“Taking the actual growth rate of -6.6% for FY21, 8.9% for FY22 and assuming a growth rate of 7.2% for FY23 and 7.5% beyond that, India is expected to overcome Covid losses in FY35,” the RBI said in its forecast. Here, FY34 refers to the year the economy will be in the same position it would have been had there been no Covid. According to the RBI, a feasible range for medium-term steady-state GDP growth in India works out to 6.5-8.5%, consistent with the blueprint of reforms that it has provided. It also said that reducing general government debt to below 66% of GDP over the next five years is important to secure India’s medium-term growth prospects.
The output losses for individual pandemic years have been worked out to Rs 19.1 lakh crore, Rs 17.1 lakh crore and Rs 16.4 lakh crore for FY21, FY22 and FY23, respectively. The loss for all three years adds up to Rs 52.6 lakh crore. The report cites WHO data to show that India, with 8.5% of the total cumulative Covid cases, ranked second after the US with 15.8% of cases.
“A number of factors worked in conjunction to culminate into the most severe economic impact for India, with the stringency of the lockdown as the most cited reason,” the report said. The brunt of the second wave was felt in the first quarter of FY22. Camouflaged by statistical base effects, the level of GDP fell 8.3% below the pre-pandemic (or corresponding FY20) level,” the RBI said.
The RBI’s report, which has a theme of ‘revive and reconstruct’, proposes a reforms blueprint around seven wheels of economic progress – aggregate demand; aggregate supply; institutions, intermediaries & markets; macroeconomic stability & policy coordination; productivity & technological progress; structural change; and sustainability.


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