India's GDP To Be Just 1% Above Pre-Pandemic Levels In FY22, Says RBI Deputy Governor Michael Patra

Speaking at the annual Asia Economic Dialogue, Michael Patra said India has lost up to 15 per cent of output forever, which has resulted in the loss of livelihoods as well.

New Delhi: Even after the estimated 9.2 per cent growth in FY22, the gross domestic product (GDP) of India will be just 1 per cent above the pre-pandemic levels, Reserve Bank of India’s (RBI’s) Deputy Governor Michael Patra has said.

Making it clear that India’s slide on growth began in 2017, much before the pandemic, this factor coupled with comfort on inflation make the RBI to continue with the accommodative monetary policy, Patra said.

Speaking at the annual Asia Economic Dialogue organised by the Pune International Centre, Patra said India has lost up to 15 per cent of output forever, which has resulted in the loss of livelihoods as well.

Patra, who oversees the critical monetary policy department in the central bank, denied India being behind the curve on acting against inflation and beginning to hike rates as is being done by other countries, saying the price rise has peaked in January, adding that the RBI “reserves the right to choose its time to normalise”.

“India is in a comfortable position as far as inflation is concerned. And, since that is there, we have the headroom to support growth and we will do so because we are dealing with lost output, lost livelihoods,” Patra said.

He added that the 6.01 per cent headline inflation in January is the peak level and the same will decline to the RBI’s target of 4 per cent by the December 2021 quarter.

On growth, India, which had one of the strictest lockdowns on entering the pandemic in 2020 that led to a nearly one-fourth contraction in the economy in Q1FY21, was the second worst-hit country after Peru, he said.

“And, if you knock out the fiscal stimulus, India exceeds the depression of Peru. So, we have dug out of the deepest recessions in the world,” the central banker said.

On the issue of inflation, he said the level is appearing elevated purely because of the base effects but the momentum or month-on-month change in inflation is negative and pulling down inflation.

“Our sense is that headline inflation has peaked in January and from here on, it will ease down to the target of four per cent by last quarter of 2022. This has provided us the space to maintain the policy rates low and persevere with an accommodative stance, so that we can focus all energies on accelerating and broadening the recovery,” he added.