India's GDP recovery years away: RBI deputy governor Michael Patra

NEW DELHI: Coronavirus' impact on the economy is unlike any other and it could take years to regain the lost output, RBI Deputy Governor Michael Patra has warned. 

"If the projections hold, the level of GDP would have fallen approximately 6 per cent below its pre-COVID level by the end of 2020-21 and it may take years to regain this lost output," Batra said at the Monetary Policy Committee (MPC) meeting earlier this month, whose minutes were released on Friday. 

"There is also an anecdotal sense that the economy’s potential output has fallen, and the post-Covid growth trajectory will look very different from what has been recorded so far," Patra added. Advocating structural reforms, the deputy governor pointed out that both monetary and fiscal policy in India face tightening constraints. 

"For fiscal policy, it is the collapse of tax revenue - by 32 per cent in the first quarter; consequently, the Centre’s revenue deficit during April-August is 121.9 per cent of budget estimates. For monetary policy, it is the persistence of headline inflation above 6 per cent for the third month in succession. Structural reforms to unlock growth impulses are needed, but may lack social traction in an atmosphere of depressed growth and employment, and high uncertainty," he noted.

India's economy is estimated to have contracted 23.9 per cent in the April- June quarter while RBI projections peg the full-year contraction at 9.5 per cent.