Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das, addresses a press conference at the RBI headquarters in Mumbai, Monday, said that India’s growth momentum would be impacted along with global economies due to Covid-19 and announced measures to mitigate its effects. Das said India is not immune to this pandemic as he pointed out that more than 100 cases have been reported.
“The second round of effects of the pandemic could operate through a slowdown in the domestic economic growth and would obviously be a result of a synchronised slowdown in global growth and as a part of that the growth momentum in India would also be impacted somewhat,” Das said during a press conference.
“Efforts are being mounted by the government on war-footing… RBI has several policy instruments and stands ready to ensure that the effects of Covid-19 are mitigated,” Das said.
Das proposed measures including conducting another six months dollar sell/buy swap on March 23 to provide liquidity to markets and said to improve monetary transmission RBI will conduct long-term term repo operations (LTRO) in multiple tranches up to Rs 1 lakh crore at policy rate. “This will be followed by a review of our long term repo operations (LTRO),” he said.
India, the RBI governor said, is relatively insulated from the global value chain and to that extent, the impact of the pandemic on India will be less. “But India is integrated into the global economy so there’ll be some impact. We are evaluating and we’ll announce it when we hold a policy meeting. A decision on rate will be taken in MPC meeting. I’m not ruling out any possibility [on rate cut],” he added. “Rate decision will be taken in MPC meeting. I’m not ruling out any possibility [on rate cut],” he said.
The hurriedly called press conference comes amid widespread call for a rate cut following similar steps by the world’s leading central banks. The US Federal Reserve has cut the policy rates to near-zero levels in a span of 10 days. The Bank of England has also slashed the rates by 50 basis points, and so did the European Central Bank.
If a rate cut is announced, this will be first inter-meeting rate reduction since the monetary policy committee was instituted in February 2016. According to PTI, many analysts have said RBI has legroom to cut rates to the tune of 65 bps by June. Some like Barclays and BofA have also spoken about the likelihood of an inter-meeting cut before the April 3 policy meeting, PTI reported.
The central bank has cut the policy rates by a cumulative 135 bps to a nine-year low of 5.15% between February and October 2019. More than 6000 people have been killed, most of them in China since the coronavirus outbreak began in China late last year. The pandemic has ebbed in China but the epicentre has moved to Europe now with Italy and Spain being the worst-hit, forcing both the nations to go on complete lock-down.
Markets have been in a free-fall over the past week over the impact of the coronavirus outbreak on global growth. The BSE Sensex plunged over 2713 points or 7.96% lower at 31,390.07 on Monday, tracking a selloff in Asian peers as the coronavirus pandemic continued to wreak havoc on markets. The broader NSE Nifty gave up the 9200 level, slumping 757.80 points or 7.61% to close at 9197.40.
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