- Recently, the Reserve Bank of India released a Report on Currency and Finance (RCF).
- RCF estimated 6.5-8.5 percent as a feasible range for medium-term GDP growth with a timely re-balancing of monetary and fiscal policies likely being the first step in this journey.
- The report reflects the views of the contributors and not of the central bank.
- The RCF cautioned that growth is at risk once general government debt exceeds a threshold of 66 per cent of GDP.
- India suffered among the biggest pandemic induced losses in the world in terms of output, lives and livelihoods, which may take years to recover.
- Economic activity has barely recovered to pre-COVID levels even after two years.
- India’s economic rebound also faces difficult challenges from the legacy of deep-rooted structural bottlenecks as well as the scars of the pandemic.
- The Russia-Ukraine conflict has also dampened the momentum of recovery, with its impact transmitting through record-high commodity prices, weaker global growth outlook and tighter global financial conditions.
- Timely re-balancing of monetary and fiscal policy should be the first step in the journey towards sustained growth.
- The report has suggested structural reforms, including enhancing access to litigation-free low-cost land, raising the quality of labour through public expenditure on education and health and Skill India Mission, and scaling up R&D activities with an emphasis on innovation and technology.
- The report recommended creating an enabling environment for startups and unicorns, rationalisation of subsidies that promote inefficiencies and encouraging urban agglomerations by improving the housing and physical infrastructure.
- RCF emphasised that it is necessary to wean away public sector banks (PSBs) from their dependence on the government for recapitalisation.
- Monetary policy has to assign priority to price stability as the nominal anchor for the future growth trajectory.