The Indian economy may take more than a decade to overcome the losses emanating from the COVID-19 pandemic, said a report published by the Reserve Bank of India.
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 perturbations from repeated waves of COVID-19 have come in the way of sustained recovery and the quarterly trends in GDP essentially followed the ebbs and flows of the pandemic, said the chapter 'Scars of the Pandemic' in the Report on Currency and Finance (RCF) for the year 2021-22.
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. 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.
"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," the report said. 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 stands at 7.1 per cent (CAGR for 2012-13 to 2016-17). "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. It pegged the output losses for individual years at 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 report has been authored by officials in the RBI's Department of Economic and Policy Research (DEPR). The RBI, however, said the findings and conclusions expressed in the report are entirely those of the contributors and do not represent the views of the central bank. The dividends of reforms initiated to counter the pre-COVID slowdown along with additional measures and initiatives during the pandemic will help launch the economy on a sustainable high growth path, it said. As per the report, the behavioural and technological changes brought about by the pandemic may usher in a new normal which would not necessarily ape the pre-pandemic trends but would be built on a more efficient, equitable, clean and green foundations.