GDP To Be Just 1% Above Pre-Pandemic Level In Current Fiscal: RBI Deputy Governor

India's gross domestic product (GDP) will be just one per cent above the pre-pandemic level even after the estimated 9.2 per cent growth in the current fiscal and this factor coupled with comfort on inflation, make the Reserve Bank of India (RBI) to continue with accommodative monetary policy.

This was stated by RBI deputy governor Michael D Patra on Wednesday, while addressing the annual Asia Economic Dialogue organised by Pune International Centre.

Making it clear that India's slide on growth began in 2017, much before the pandemic, Mr Patra, who oversees the critical monetary policy department in the central bank, said the country has lost up to 15 per cent of output forever, which has resulted in the loss of livelihoods as well.

He 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. Mr Patra also said 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," Mr Patra said in his address.

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 four per cent by the December 2021 quarter.

On growth, he said 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 the first quarter of 2020-21, was the second worst-hit country after Peru.

"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," Mr Patra added.

On inflation, he said the level is appearing elevated purely due to 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.

He said the cuts in excise duties of petroleum products are still working the way through the economy and keeping these pressures subdued.