Structural reforms and price stability are the pre-requisites for achieving a medium-term steady economic growth of 6.5-8.5 per cent, according to a RBI report.
The Report on Currency and Finance (RCF) for the year 2021-22 also emphasised that timely re-balancing of monetary and fiscal policy should be the first step in the journey towards sustained growth.
RBI said the report reflects the views of the contributors and not of the central bank.
The report has suggested structural reforms, including enhancing access to litigation-free low-cost land, raising the quality of labour through public expenditure on education and health and Skill India Mission, and scaling up R&D activities with an emphasis on innovation and technology.
Further, the report recommended creating an enabling environment for startups and unicorns, rationalisation of subsidies that promote inefficiencies and encouraging urban agglomerations by improving the housing and physical infrastructure.
India suffered among the biggest pandemic-induced losses in the world in terms of output, lives, and livelihoods, which may take years to recover, it added.
"Economic activity has barely recovered to pre-COVID levels even after two years. India's economic rebound also faces difficult challenges from the legacy of deep-rooted structural bottlenecks as well as the scars of the pandemic," it said.
As per the report, the Russia-Ukraine conflict has also dampened the momentum of recovery, with its impact transmitting through record-high commodity prices, weaker global growth outlook, and tighter global financial conditions.
Concerns surrounding de-globalisation impacting future trade, capital flows and supply chains have amplified uncertainties for the business environment, it added.
Against this backdrop, the report said India's medium-term growth outlook hinges critically on policy measures to address structural bottlenecks and harness emerging new growth opportunities.
"A feasible range for medium-term steady-state GDP growth in India works out to 6.5–8.5 per cent, consistent with the blueprint of reforms," it said, adding that timely re-balancing of monetary and fiscal policies will likely be the first step in this journey.
Also, price stability is a necessary precondition for strong and sustainable growth, it said.