RBI urges Indian govt to reduce debt to below 66% of GDP over 5 years

The theme of the report is ‘Revive and Reconstruct’ in the context of nurturing a durable recovery post-COVID and raising trend growth in the medium term.

In a chapter titled ‘A Policy Agenda for Post-Covid-19 India’, RBI said that a feasible range for the medium-term steady state GDP growth in India works out to 6.5-8.5 per cent. “Timely rebalancing of monetary and fiscal policies will likely be the first step in this journey,” it said.

The report outlined the steps that need to be taken to move to a steady growth trajectory. First, the large surplus liquidity overhang will have to be withdrawn.

Every percentage point increase in surplus liquidity above 1.5 per cent of net demand and time liabilities (NDTL), or deposits with the banking system, causes average inflation to rise by 60 basis points (bps) in a year, RBI said, adding, “monetary policy has to assign priority to price stability as the nominal anchor for the future growth trajectory”.

ALCHEMPro News Desk (DS)