The Indian economy is likely to take over 12 years to overcome the Covid-19 losses, according to a report released by the Reserve Bank of India (RBI) on Friday.
"Taking the actual growth rate of (-) 6.6 per cent for 2020-21, 8.9 per cent for 2021-22 and assuming growth rate of 7.2 per cent for 2022-23, and 7.5 per cent beyond that, India is expected to overcome Covid-19 losses in 2034-35," the report said.
In its report on 'currency and finance for the year 2021-22', the RBI said, the pandemic is a watershed moment and the ongoing structural changes catalysed by the pandemic can potentially alter the growth trajectory in the medium-term.
Following a sharp contraction in the first quarter of 2020-21, the economic momentum progressively picked up till it was hit by the second wave in April-June period of 2021-22.
Similarly, the impact of the third wave, concentrated in the month of January 2022, partially dented the recovery process, it said.
With the ongoing Russia-Ukraine conflict, the downward risks to global and domestic growth are getting accentuated through surge in commodity prices and global supply chain disruptions, it noted.
"Sustained thrust on capital expenditure by the government, push to digitalisation and growing opportunities for new investment in areas like e-commerce, start-ups, renewables and supply chain logistics could in turn, contribute to step up the trend growth while closing the formal-informal gap in the economy," the report noted.
The RBI further noted in the report, the pre-Covid trend growth rate works out to 6.6 per cent (CAGR for 2012-13 to 2019-20) and excluding the slowdown years it works out to 7.1 per cent (CAGR for 2012-13 to 2016-17).
In an analysis of the impact of Covid-19 on the economy, the report has estimated the output losses during the pandemic period at around Rs 52 lakh crore.
The output losses for individual years have been worked out to Rs 19.1 lakh crore, Rs 17.1 lakh crore and Rs 16.4 lakh crore for 2020-21, 2021-22 and 2022-23, respectively.
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.
The blueprint of reforms proposed in the report revolves around seven wheels of economic progress -- aggregate demand; aggregate supply; institutions, intermediaries and markets; macroeconomic stability and policy coordination; productivity and technological progress; structural change; and sustainability.
The report noted the pandemic is not yet over.
"A fresh wave of Covid has hit China, South Korea and several parts of Europe. However, various economies are reacting divergently ranging from a no-Covid policy in some jurisdictions on the one hand to those with relatively open borders and removal of internal restrictions."
"In India, the restriction levels are being dynamically calibrated at local levels in response to the evolving situation," it said.
In the foreword to the report, RBI Governor Shaktikanta Das said it was not sufficient to just stabilise the economy and return it to its pre-first wave path.
"The task at hand is to create a virtuous cycle of greater opportunity for entrepreneurs, businesses, and the fiscal authority," he said.