The Reserve Bank of India slashed interest rates on Friday in an emergency move to counter the economic fallout from the coronavirus pandemic after the government locked down the country to slow the spread of infections.
Prime Minister Narendra Modi has asked India’s 1.3 billion people to stay indoors for three weeks in the world’s biggest lockdown, shutting down Asia’s third-largest economy and leaving millions of economically vulnerable people without work.
The central bank lowered the benchmark repo rate by 75 basis points to 4.40 per cent after a video conference meeting of its monetary policy committee, which was brought forward to respond to the crisis.
“Clearly a war effort has to be mounted and is being mounted to combat the virus, involving both conventional and unconventional measures in a continuously battle-ready mode,” RBI Governor Shaktikanta Das said.
The RBI cut rates as other countries across South Asia also sought to shore up their economies to withstand the crisis. The move came a day after the government announced a $22.6-billion stimulus plan to ease the pain of the poor through direct cash transfers and food security measures.
Even before the pandemic struck, the country’s economy was struggling. Growth has probably weakened to at least an eight-year low this quarter, and is likely to slow even more sharply in the next six months, according to a poll of economists by news agency Reuters.
PM Modi, who has been under pressure to get growth going, applauded the interest rate cut.
“Today the RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses,” he said in a tweet.
South Asia In Crisis
India has reported 724 coronavirus cases, and 17 people have died, but there are fears the toll could overtake other hard-hit countries like the United States, China and Italy.
PM Modi and international experts have said that India faces a tidal wave of infections if it doesn’t take tough steps. But efforts to combat the spread of the virus are handicapped by limited medical facilities and inadequate supplies of testing kits, according to experts.
India is hoping that, if it can keep its people under lockdown until mid-April, it will be able stem transmission of the virus within communities. Officials say infections have so far been concentrated among people either coming from overseas or those who have had contact with them.
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