Reserve Bank of India Governor Shaktikanta Das has said the central bank will not shy away from using “any instrument” necessary to revive growth and preserve financial stability to mitigate the adverse economic impact of the coronavirus pandemic, PTI reported on Monday. The decision was made at last month’s Monetary Policy Committee meeting, which was advanced from its original dates of March 31, April 1 and April 3, in view of the careening health crisis.
At the end of the meeting, the committee decided to cut the policy repo rate to 4.4%. Alongside, the Reserve Bank of India announced measures to infuse Rs 3.75 lakh crore in liquidity, and include a 100-basis-point cut in the cash reserve ratio, according to Bloomberg Quint.
According to the minutes of the meeting released by the central bank, Das also said that the global macroeconomic situation had abruptly worsened in the last fortnight.
Authorities and central banks in many countries have deployed an extensive range of targeted policy instruments to deal with the macroeconomic fallout of Covid-19 caused by lockdowns and social distancing. However, Das said, there was a “rising probability” of a global recession, which may be deeper than the one experienced during the global financial crisis in 2008.
India’s near-term growth outlook has deteriorated sharply, the RBI governor said. He said that initially this happened because of the global spillovers and the amplification of the Covid-19 outbreak, and then because of the “much-needed efforts by the government to contain the pandemic by declaring a nationwide lockdown”.
The central bank’s outlook on the inflation rates in India have also changed drastically, Das said. “The usual uptick that begins in summer months may remain subdued if demand conditions take longer to normalise,” he said. “The weakening of domestic aggregate demand may also help to contain core inflation.”
“The Covid-19 pandemic is an invisible assassin which needs to be contained quickly before it spreads and wreaks havoc on valuable human lives and the macro economy,” Das said. “In this scenario, it is important to ensure that finance, which is the lifeline of the economy, keeps flowing seamlessly to various sectors of the economy.”
Das said monetary policy needs to proactively arrest any deterioration in aggregate demand as he advocated a 75 basis reduction in repo rate. “The Reserve Bank will continue to remain vigilant and will not hesitate to use any instrument conventional and unconventional to mitigate the impact of Covid-19, revive growth and preserve financial stability,” he said.
The Indian government has so far confirmed 9,152 Covid-19 cases, including 308 deaths.