On April 29, 2022, the Reserve Bank of India (RBI) released the ‘Report on Currency and Finance (RCF)’ for the year 2021-22 on the theme ‘Revive and Reconstruct’. In accordance to its Chapter-VI ‘A Policy Agenda for Post-Covid-19 India’s feasible range for the medium-term steady state GDP (Gross Domestic Product) growth is 6.5-8.5%.
- In this regard, a reduction in general government debt to below 66% of GDP over the next five years is required to secure India’s medium-term growth prospects.
i.Taking the actual growth rate of -6.6% for 2020-21, 8.9% for 2021-22 and assuming growth rate of 7.2% for 2022-23, and 7.5% beyond that, India is expected to overcome Covid-19 losses in 2034-35 i.e. around 13 years.
- It needs to focus on seven wheels of economic progress – aggregate demand, aggregate supply, institutions, intermediaries and markets, macroeconomic stability and policy coordination, productivity and technological progress, structural conditions and sustainability.
ii.RBI expects the Indian economy to grow at 6.3% in FY24.
iii.India’s real GDP in FY22 is estimated to be Rs 147.54 lakh crore.
iv.Data analysis shows that the output losses, in monetary terms, stood at Rs 19.1 lakh crore for FY21, Rs 17.1 lakh crore for FY22 and Rs 16.4 lakh crore for FY23.
- Overall, the output losses during the pandemic period at around Rs 52 lakh crore.
Incentive Mechanism for PSBs with Better Asset Quality:
i.In its report, RBI mooted an incentive mechanism, where Public Sector Banks (PSBs) with better performance in loan recovery and asset quality improvement, could be given priority in access to fresh capital.
ii.It also called for strengthening the infrastructure of the Insolvency and Bankruptcy Code to ensure quicker and more effective resolution. This can be done by increasing the number of NCLT benches and by training more insolvency professionals.
Labour reforms: Unemployment insurance fund, universal access to social security needed
i.RBI suggested firms to build an unemployment insurance fund during the economic boom period to provide universal access to social security.
- This is because 79% of the working population in the informal job sector does not have a written contract. About 5% of these workers have a contract for less than one year, less than 3% have a contract signed for 1-3 years, and 15% have a written contract for more than 3 years.
ii.On the education profile of the workforce, 28% of them are illiterate, and another 26% have received only primary school education. Only 9% possess a graduate/postgraduate degree.
- So there is need for raising the quality of labour through large-scale expansion of public expenditure on education and health and the Skill India mission.
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Recent Related News:
i.RBI has decided to allow banks in India to undertake transactions in the offshore Foreign Currency Settled-Overnight Indexed Swap (FCS-OIS) market with non-residents and other market makers.
ii.RBI has increased the investment limit under the Voluntary Retention Route (VRR) for foreign portfolio investors (FPIs) from 1.5 lakh crore to Rs 2.50 lakh crore (increased by Rs 1 lakh crore) with effect from April 1, 2022.
About Reserve Bank of India (RBI):
Establishment– April 1, 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors– Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar.