According to the Reserve Bank of India (RBI), the Indian economy is likely to take 12 financial years to recover from the pandemic losses due to the continuing Russia-Ukraine conflict.
The Reserve Bank of India has proposed a report on currency and financing for the year 2022. However, in its report, RBI has mentioned that the Indian economy will take approximately 12 years to recover from the pandemic damage.
The report stated, “The actual growth rate is -6.6 percent for 2020–21 and 8.9 percent for 2021–22. While assuming a growth rate of 7.2 percent for 2022–23 and 7.5 percent beyond that, it is expected that India will overcome COVID-19 losses in 2034–35. “
However, the report does not reflect the opinions of the central bank but the research team of the RBI’s department of Economics and Policy Research. The Report on Currency and Financing (RCF) for the year 2022 is based on the theme of “Revive and Reconstruct”.
Key features mentioned in the report of the RBI research team
The report says that the pandemic is a watershed moment. This signifies that the pandemic has created such a major impact on all aspects that it is almost hard to reverse. However, given the present government initiatives, the economic trajectory may improve in the near future.
The report said if the government continues to spend on capital and further encourages digitalisation, it will benefit the growth of the economy. Moreover, the government must also invest in growing opportunities in e-commerce, start-ups, renewables, and supply chain logistics to contribute to stepping up the trend growth. This will also result in closing the formal-informal gap in the economy.
On the other hand, the continuous disruptions due to the repeated COVID waves are another threat to the growing economy. For instance, during the sharp contraction in the month of June 2020 quarter, the economy started reviving after the 2 month lockdown. Shortly after this, the economy was hit by the second wave. Similarly, the 3rd wave resulted in a slowing down of the growth rate of the nation’s economy.
Additionally, the report said that the danger posed by the pandemic is still not over. With the increase in cases seen in China recently, it has resulted in absolute lockdown in many cities in China. Currently, many states in India are reporting COVID-19 cases.
The report also stated the threat of war conditions prevailing in Ukraine due to the Russia-Ukraine war. The war has impacted the global economy due to the rise in fuel prices. It said, “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.”
It was further noted that India also faced the threat of soaring prices during the war. The global supply chain was disrupted with the supplier’s delivery time failing to its lowest point. This resulted in an increase in delivery time and higher raw material prices due to the squeezing profits of firms. The growth risk was highly affected by the geopolitical situation, especially when oil prices were already high because of the post-pandemic effect.
Published by: Diwakar Kumar
Edited by: Aaradhana Singh
