Former RBI governor sees GST, note-bank shocks lasting for 2 more years

December 10, 2017 17:29

Refusing to hazard a guess on GDP growth in the short-term given the shocks like GST, note-ban and the mountain of bad loans, former Reserve Bank governor Y V Reddy has said the economy requires two more years to consolidate and claw back to higher growth levels.

It is very difficult to make a forecast on economic growth now or say when the economy will return to the potential growth levels of say 7.5 to 8 per cent, which is unlikely in the next 24 months, he said.

In a shock, the negative element is front-loaded. There will be some moderation, and there can be some gains. The pain is there now, the gains will come later. How much gains and in what gap are the issues, Reddy said.

My guess is it might take a couple years to consolidate. In a couple of years, we should at least aim to go back to 7.5-8 per cent growth, the former central banker said.

The shock element is tapering off but the positive aspect is yet to come; and I hope it will come.

Reddy said the economy was helped by a positive shock for almost three years following the massive drop in crude price, which he underlined was at a third of what it was during his governorship.

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