Driven by a spate of reforms, India will have a V-shaped economic recovery even as the impact of the second Covid wave looks likely to be muted, said Krishnamurthy Subramanian, chief economic adviser to the government.
The country's economy will start witnessing a growth of 6.5 to 7 per cent from fiscal 2023 onwards, helped by various reforms undertaken by the government and also due to the success of Covid-19 vaccination drive. Subramanian expects the impact of the second wave not to be very significant. The country's economy contracted by 7.3 per cent in fiscal 2020-21.
“Together with the reforms and focus on vaccination, I expect growth to start hitting close 6.5 to 7 per cent from FY23 onwards and accelerate from there on,” Subramanian said at a virtual event organised by Dun & Bradstreet.
“When history looks back at this period, these reforms will be equated to be (sic) as path-breaking as the 1991 reforms,” he said.
While GDP growth from the fourth quarter of last year was negative, Subramanian pointed to other indicators like gross fixed capital formation and consumption to claim India has shown its resilience. He said he was certain that India would touch “7 per cent-plus growth consistently” this decade.
“Given the significant reforms that have been done over the last one and a half years, I have no hesitation in saying that I look forward to a decade of high growth for India.” He said the momentum in recovery that was seen in the fourth quarter of FY21 and overall in the second half of FY21 got impacted to some extent by the second wave of COVID-19.
Reserve Bank of India (RBI), meanwhile said that there would be substantial slack in growth for the economy, although it is poised to recover and witness positive growth in the current fiscal.
The RBI Bulletin for July 2021 noted that the economy is struggling to regain the momentum of recovery that had started in the second half of 2020-21 but was interrupted by the second wave of Covid.
“Even with a 9.5 per cent GDP growth in 2021-22, there will be substantial slack in the economy and demand pressures may take some more time to become evident,” the RBI said.
A pick-up in inflation will be driven largely by adverse supply shocks due to disruptions caused by the pandemic, including increases in margins and taxes, it said, adding that there are also specific demand-supply mismatches as in the case of protein-rich food items, edible oils and pulses, which are being addressed by specific supply-side measures.
“But more needs to be done. Elevated international commodity prices, especially of crude, are also imparting cost-push pressures. These factors should ease over the year as supply-side measures take effect,” the RBI Bulletin said.
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