India is forecast to overcome pandemic-induced losses by FY35, according to a report by the Reserve Bank of India (RBI), prioritising price stability for the country’s future growth trajectory.

Within its Currency and Finance Report for 2021-22, the central bank said India has sustained some of the largest Covid-fuelled losses in the world in regard to output, lives and livelihoods. Activity in the economy has since barely recovered to pre-pandemic levels.

In addition, the RBI said the pace of the economic recovery has been impacted by the war in Ukraine, via all-time high commodity prices, a weaker global growth outlook and tighter global financial conditions, says a Mint report.

However, ongoing government capital expenditure, the sustained push towards digitalisation as well as increasing investment opportunities in e-commerce, renewable and start-ups may bolster growth, the central bank went on to add.

The RBI said the pre-Covid trend growth rate stands at 6.6%, and not including the slowdown years, hits 7.1%.

Taking the actual growth rate of (-) 6.6% for 2020-21, 8.9% for 2021-22, and assuming a growth rate of 7.2% for 2022-23, and 7.5% beyond that time, the central bank said: "India is expected to overcome COVID-19 losses in 2034-35."

The RBI report added: "For restoring and recreating a policy environment conducive for private sector-led growth post-COVID, timely rebalancing of monetary and fiscal policies may become necessary given the current configurations of debt and liquidity. Government debt exceeding threshold levels exerts upward pressures on the term premium and dampen growth.

“Time varying fiscal multipliers suggest that fiscal consolidation is not growth retarding once the economy recovers to its steady state. The debt path over the next five years, even under the best-case scenario, may further squeeze fiscal space unless strategic policy efforts covering both taxes and expenditure aim at targeted consolidation."