The Indian government will need to develop a plan to “stabilise” the economy, the Reserve Bank of India said, adding that it expects to publish a “high level” forecast for jobs growth for the 2021 census.
The Reserve Bank has forecast India’s GDP to grow by 6.4 per cent, its slowest pace in a decade, and its unemployment rate to remain below 5 per cent through 2022.
However, the central bank said it expects the growth rate to dip to 2 per cent in the decade to 2021.
It said it has been forecasting India’s labour force to grow at a faster pace than in any previous decade.
“The unemployment rate in 2021 is expected to be 5.9 per cent.
We have been anticipating that the labour force will grow at the rate of 7 per cent per annum and by 2021 it is expected that labour force participation will increase to 90.5 per cent,” RBI Governor Raghuram Rajan said during the speech at the International Business and Economic Forum in New Delhi.
The central bank also said it will be able to “strengthen the financial framework of the economy” and boost economic growth.
“We are also optimistic about the growth of the domestic consumption sector and are optimistic about India’s economic and fiscal expansion.
The Reserve bank has forecast that in 2021, India’s gross domestic product (GDP) will expand by 6 per cent on average.
This is on the basis of a 5.6 per cent increase in gross domestic products, an increase of 5.4 percentage points in the consumer price index (CPI) and an increase in the growth in consumer spending,” the RBI said in its latest economic update.
The RBI said it would use the 2019 census to set an ambitious target for India’s growth rate in the 2020 census, as the current population census will be held in December 2021.
The government will also have to make decisions on setting up a National Education Policy that would help create jobs for the youth, the RBI Governor said.
“We will be looking at a number of things in this context and there is no doubt that the key element is education,” he said.
Rajan said the Reserve Board was also “preparing for the transition to the new economic architecture of the 21st century” and the government had taken a number step-wise steps to help the economy adapt to the changing environment.
“What is being discussed are things like the adoption of the Digital India strategy and a new set of governance instruments.
In addition, we are preparing for the implementation of GST, and this will be followed by the implementation in the new economy of GST.
Finally, the government has to prepare a roadmap for the new GST regime and we are taking all steps to implement it,” Rajan added.
Rajani also said that the government would be working on ways to ease the impact of climate change, especially in the areas of rural and urban development.
“It is a challenging task to create a new economy.
But it is possible.
We have done this for a very long time and there are several countries who have done it.
It is possible,” he added.
The RBI Governor also said the country is currently witnessing an economic crisis, adding there was “no other way to handle the situation”.
“The government has already undertaken a number steps.
For instance, it has taken the first step in setting up the Central Bank of Reserve Bank and the first steps have already been taken to tackle the issue of inflation, which has now reached record highs,” Rajani said.”
But there is nothing else we can do,” he urged.
On Friday, Rajan had also said India’s economy was already on a “path to recovery” after more than a decade of economic contraction.