RBI announces measures to lessen impact of Coronavirus on economy; warns of slow growth

With Sensex crashing over 2000 points, the RBI governor Shaktikanta Das, on Monday, assured that while the Indian economy was affected by the pandemic Coronavirus (COVID-19), the domestic liquidity conditions remain comfortable. He said that trade in sectors like drugs, electronics, pharmaceuticals, chemicals, etc which were most exposed to China was hurt the most. He also introduced two measures to battle the economic slowdown due to a fall in trade.

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RBI announces measures to improve Indian economy

• RBI will conduct another 6 months US dollar sell-buy swap on March 23 to provide liquidity to the Foreign Exchange market.
• To counterbalance the domestic liquidity effects of the sell-buy swap,  RBI will conduct LTRO in multiple tranches upto a total amount of Rs 1 lakh crores at the policy rate. This will be followed by a review of the performance of LTRO.

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Impact of COVID-19 on Indian economy

Talking about the war-footing efforts undertaken by the Indian government to tackle the economic slowdown due to the pandemic, Das said that domestic economic growth will be hit in the second round due to synchronised slowdown in global growth. Listing sectors like tourism, hospitality, airlines and others, which have been severely hit due to stall of global travel, he said that the RBI has several policies in its command to make markets function normally. To support minimal social contact, he said it is a good idea to use digital use of payment wherever cash payment is involved by using apps like the IMPS, UPI, Bharat Bill Payment Systems.

"India is not immune to this pandemic. Efforts have been done on a war footing. COVID -19 can hurt India in trade channels especially in drugs, electronics, pharmaceuticals, chemicals, etc in which exposure to China is more. The 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. As a part of that, the growth momentum in India would also be impacted somewhat," he said.

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He added, "But lack of response to our 7-day Repo auction of Rs 25,000 crore has reassured us that domestic liquidity conditions remain comfortable. Already sectors like tourism, hospitality, airlines, and others are being affected due to the outbreak. RBI has several policies in its command stand ready to ensure that the effects of COVID-19 are mitigated and financial markets function normally."

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Sensex crashes by 2713 pts

Resuming its free fall, the BSE Sensex plunged over 2,713 points on Monday, tracking a selloff in Asian peers as the coronavirus pandemic continued to wreak havoc on markets. The 30-share BSE index settled 2,713.41 points or 7.96 per cent lower at 31,390.07. Likewise, the broader NSE Nifty gave up the 9,200 level, slumping 757.80 points or 7.61 per cent to close at 9,197.40. Many analysts, over the past week, have said the RBI has legroom to cut rates to the tune of 65 bps by June and have also spoken about the likelihood of an inter-meeting cut (before the April 3 policy meeting).