The Reserve Bank of India has released the Report on Currency and Finance (RCF) for the year 2021-22 on 29 April 2022. The theme of the Report is “Revive and Reconstruct” in the context of nurturing a durable recovery post-COVID and raising trend growth in the medium-term. In a statement released by the RBI, RBI declaims that the report is not of RBI but of the contributors.

The report proposes seven point reforms of economic progress

  1. aggregate demand;
  2. aggregate supply;
  3. institutions,
  4. intermediaries and markets;
  5. macroeconomic stability and policy coordination;
  6. productivity and technological progress;
  7. structural change; and sustainability

According to the report the ideal range of GDP growth in India works out to 6.5 – 8.5 per cent. According to the IMF World Economic Outlook (WEO) released in January 2022, global economic growth is expected to be 4.4 percentange. FICCI’s Economic Outlook Survey puts forth an annual median GDP growth forecast for 2021-22 at 9.0%. The minimum and maximum growth estimate stood at 8.5% and 9.7% respectively. The survey states that “The impact of the pandemic was disproportionately higher in the informal sector where employees did not have an option of work from home and absence from work resulted in loss of wages. This along with increased health costs and lack of social security benefits have had a bearing on purchasing power of consumers”.

As per the Monthly Summary on important policy decisions pertaining to Department of Economic Affairs (DEAI for the month of February,2022)

The real GDP growth estimated for 2021-22 at 8.9 % is likely to be realized and provide the economy the full recovery of real GDP from the level of 2019-20, while also serving as a launch pad for a near 8 % growth projected in the Economic Survey, Budget 2022-23 and RBI’s Monetary Policy Committee (MPC) meeting of February,2022.

For medium-term steady state GDP growth in India, timely rebalancing of monetary and fiscal policies will likely be the first step in this journey.

What is meant by Fiscal Policy?

Fiscal policy deals with the taxation and expenditure decisions of the government. Monetary policy, deals with the supply of money in the economy and the rate of interest. These are the main policy approaches used by economic managers to steer the broad aspects of the economy. In most modern economies, the government deals with fiscal policy while the central bank is responsible for monetary policy. Fiscal policy is composed of several parts. These include, tax policy, expenditure policy, investment or disinvestment strategies and debt or surplus management. Fiscal policy is an important constituent of the overall economic framework of a country and is therefore intimately linked with its general economic policy strategy.

Further the report states that “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. Currently India’s general government debt is 90.6% of GDP as per the IMF’s Fiscal Monitor report.

The report suggested structural reforms include enhancing access to litigation free lowcost land; raising the quality of labour through public expenditure on education and health and the Skill India Mission; scaling up R&D activities with an emphasis on innovation and technology; creating an enabling environment for start-ups and unicorns; rationalisation of subsidies that promote inefficiencies; and encouraging urban agglomerations by improving the housing and physical infrastructure

The GDP slowdown coincided with sluggishness in the labour market. The decline in employment in general, and the depressed employment in the construction sector resulted in low rural wages.

As per WHO, in India, from 3 January 2020 to 29 April 2022, there have been 43,072,176 confirmed cases of COVID-19 with 523,753 deaths, reported to WHO. As of 25 April 2022, a total of 1,881,699,433 vaccine doses have been administered.

India is the second most affected nation due to the pandemic since 2020 after United States.

Leave a Reply

Your email address will not be published.

error: Content is protected !!