Feasible GDP growth over the medium term is 6.5-8.5%, says RBI paper

Price stability is a necessary precondition for strong and sustainable growth, it adds

The feasible range for medium-term steady state GDP growth in India works out to 6.5-8.5 per cent, the currency and finance report of the Reserve Bank of India.

The report for 2021-22 year has the theme “Revive and Reconstruct” in the context of nurturing a durable recovery post-Covid and raising trend growth in the medium term.

“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,” the report said.

The report prioritised inflation over growth as it said price stability is a necessary precondition for strong and sustainable growth.

RBI has clarified that the report reflects the views of the contributors and not of the Reserve Bank.

RBI governor Shaktikanta Das, the foreword, said, “the resilience of certain sectors like agriculture and allied activities, information technology services, exports, digitalisation and renewable energy during the Covid-19 crisis gives us the confidence that the Indian economy can stage a strong comeback.

“What adds to this confidence is the way certain other sectors used this crisis to rebuild and reconfigure. These sectors would include the organised corporate sector; the financial sector; start-ups; and more recently, the manufacturing sector,” he said.

Das said the challenge is to generate a virtuous cycle of greater opportunity for entrepreneurs to innovate and invest – businesses to attract more capital and technology; and fiscal space to manage the distributional effects of the pandemic while expanding public investment in physical infrastructure and human capital.