Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday announced measures to safeguard the Indian economy amid meltdown over coronavirus outbreak concerns.
The central bank chief said that the RBI has proposed to conduct another six months USD sell/buy swap on March 23 to provide liquidity to markets. “To further improve monetary transmission RBI will conduct long-term repo operation (LTRO) in multiple tranches upto Rs1,000 crores at policy rate,” he said.
Addressing a highly-anticipated presser, the RBI governor said that even as the Indian economy was relatively insulated from the global value chain, Covid-19 could impact India directly through trade channels, in which exposure to China is relatively high.
“As far as the Indian economy is concerned, India is relatively insulated from the global value chain to that extent impact on India will be less. But India is integrated to global economy so there will be some impact,” Shaktikanta Das said.
The RBI governor predicted a dragged impact of the health crisis. “Second round of effects of the pandemic could operate through a slowdown in the domestic economic growth and it 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,” he said.
“Sectors such as tourism, airlines, hospitality industry and domestic trade and transporters are suffering a loss of activity. Spillovers are being transported through finance and confidence channels to overseas and domestic equity markets. Forex and Bond markets are also not immune,” RBI Governor Shaktikanta Das said.
The experts had speculated that Shaktikanta Das was likely to announce a rate cut following similar steps by the world’s leading central banks. However, he did not. Instead, he said that the RBI was monitoring the situation an announcement will be made after further assessment.
Many analysts, over the past week, have said the 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.
Between February and October 2019, the RBI had cut the policy rates by a cumulative 135 bps to a nine-year low of 5.15 per cent.
Since the coronavirus outbreak that began in China in mid-November last year, over 6,000 people have been killed, most of them in China. While the pandemic has ebbed in China, 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. The BSE Sensex plummeted 3,473.14 points or 9.24 per cent while the NSE Nifty lost 1,034.25 points or 9.41 per cent. On Monday, the BSE Sensex plunged over 2,000 points and the Nifty tanked below the 9,300 level.