Report on Currency and Finance
The Reserve Bank of India recently released the report on Currency and Finance (RCF) 2021-22. The theme of the report is “revive and reconstruct” to nurture a strong recovery post-COVID and raise trend growth in the medium-term. The report reflects the views of the contributors, not the Reserve Bank. The following are the highlights of the report:
- The blueprint of modification suggested in the report revolves around seven wheels of economic progress viz., aggregate demand; aggregate supply; institutions, intermediaries and markets; macroeconomic stability and policy coordination; productivity and technological progress; structural change; and sustainability.
- A feasible range for medium-term steady-state GDP growth in India works out from 6.5% to 8.5%, consistent with the blueprint of reforms
- Timely rebalancing of monetary and fiscal policies will likely be the initial step in this process.
- Price stability is an essential precondition for strong and sustainable growth.
- Reducing general government debt to below 66% of GDP over the next five years is important to secure India’s medium-term growth prospects.
- Suggested structural reform includes improving access to litigation free low-cost 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 housing and physical infrastructure.
- Industrial revolution 4.0 and committed transition to a net-zero emission target to warrant a policy ecosystem that facilitates the provision of adequate access to risk capital and a globally competitive environment for doing business.
- India's ongoing and future free trade agreement (FTA) negotiations may focus on the transfer of technology and better trade terms for high-quality imports from partner countries to improve the outlook for exports and domestic manufacturing.