The RBI Governor has already promised more policy measures, if needed, to support the economy
Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced a reduction in the repo rate to 4 per cent from the existing 4.4 per cent in a surprise move to support the economy. That marked the second cut in the repo rate - or the key interest rate at which the RBI lends short-term funds to commercial banks - so far this year. The move was aimed at countering the fallout from the ongoing nationwide lockdown to contain the spread of the coronavirus pandemic, which has pushed the economy into a standstill, hurt businesses and landed thousands jobless. In a video conference, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) had voted to maintain its "accommodative" stance. This was the RBI chief's first address to the media after the government detailed the fiscal and monetary stimulus worth Rs 20.97 lakh crore to support the economy.
Here are highlights of what RBI Governor Shaktikanta Das said:
- Have few announcements to make
- COVID-19 has crippled global economy
- It has stalled economic activity across the globe
- Repo rate reduced by 40 basis points
- Now repo rate is 4%, from 4.4% earlier
- Reverse repo rate also stands reduced by 40 basis points (0.40 percentage point) to 3.35%
- Monetary Policy Committee voted 5:1 in favour of rate reduction
- RBI to maintain accommodative stance till economic growth revives
- Domestic economic activity impacted by lockdown
- Investment demand has declined
- Government revenue has been impacted severely
- Contraction of 27% in capital goods import in March
- Private consumption has seen biggest blow due to COVID-19
- Agriculture activities however have provided hope
- Forecast of normal monsoon offers ray of hope
- Headline inflation may firm in first half of 2020, but ease afterwards
- MPC's forward guidance directional
- Inflation to fall below 4% in Q3, Q4
- Combination of fiscal, monetary, administrative measures to create conditions for gradual economic revival
- GDP growth in 2020-21 expected to remain in negative territory
- Uncertainties on COVID-19 remain
- ADDITIONAL MEASURES IN FOUR AREAS:
- To Improve Market
- To Support Trade
- To Ease Financial Stress
- To Ease Financial Constraints Faced By State Governments
