Reserve Bank of India Governor Shaktikanta Das held a press conference on Monday, 16 March, to talk about the Yes Bank situation, while also addressing the issue of the coronavirus pandemic and its impact on the Indian economy.
Das admitted that a slowdown was a probable outcome, while also maintaining that the government was making efforts to limit any negative effects.
COVID-19 a 'Human Tragedy', 'Disrupting Economic Activity' Worldwide
Das brought up the matter of the coronavirus outbreak, saying that the disease "is rapidly evolving into a human tragedy, disrupting economic activity in a wide swathe of affected countries," and was leading to intense volatility and tightened financial conditions worldwide.
Das admitted that India would be impacted to a certain degree by the worldwide outbreak. "India is not immune to this pandemic, already more than 100 cases have been reported. Efforts are being mounted by the government on war-footing," he said, adding that the outbreak "could impact India directly through trade channels, in which exposure to China is relatively high," ANI reported.
Das said that the second round of effects of the pandemic could operate through a slowdown in the domestic economic growth, as India was integrated to the global economy.
"It would obviously be a result of synchronised slowdown in global growth and as a part of that, the growth momentum in India would also be impacted somewhat," he said.
Proposes Another Sell/Buy Swap, and LTRO
Das added that industries like tourism, airlines and hospitality were already experiencing a loss of activity, adding that markets had been affected by the volatile conditions.
Adding that the uncertainty about the duration of the pandemic was leading to the volatility, he assured that the RBI was taking ‘several calibrated measures’, to ensure that markets stayed sound and resilient, and to build confidence in financial systems.
After giving further information about the status of markets, Das proposed two measures that would be followed by the central bank. The first was another US dollar sell/buy swap on 23 March to provide liquidity to the foreign exchange market.
The second, done to counterbalance the domestic liquidity effects of the swap and improve monetary transmission, was to conduct Long Term Repo Operations (LTRO) in multiple tranches upto Rs 1 lakh crore, followed by a review of this measure.
He also emphasised that at a time when social distancing was of importance, digital payments, which were safe, secure and affordable, including retail payment systems set up by RBI and and the government, should be used for transactions.
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