Mumbai, March 17, 2020: RBI Governor Shaktikanta Das media address on 16 March 2020 spilled out measures on YES bank liquidity and combat measures against global pandemic nCOV outbreak. Central Banks across the globe have slashed interest rates in the backdrop of virus turmoil looming with economies bearing the brunt of sharp economic downturn. Following the global counterparts, RBI governor’s media address ensured that apex bodies and central govt are taking the cognizance of health emergency triggered panic in the economic volatility. The calibrated measures are in place to mitigate the risk and re-instil the confidence amidst market bloodbath agony.
India Inc was out on wait and watch mode to receive positive quick fix announcement from the RBI governor to ease liquidity crisis prolonged in the Indian economic. But the deferred announcement didn’t ruled out any potential rate cut in the upcoming MPC meeting which was sigh of relief. In effect, he sought to point to it all being about the ‘right timing’ to ensure optimum impact of whatever measures were taken. For India Inc., the ‘right time’ for policy moves that provide a boost to the economy is always ‘now’, given the challenges of announcements getting converted into actual steps ‘on the ground’.
The disappointment on part of India Inc. followed the wide speculation that an emergency inter-meeting interest rate cut could be announced in line with what has been done in many countries. This was being seen as an apt response to the rapid spread of the deadly coronavirus, which has triggered heightened risk of deterioration in global growth.
The RBI Governor pointed out that as per law, only the Monetary Policy Committee (MPC) of the RBI had the authority to announce repo rate cuts. For those who would have wanted a rate cut right away, this was a technicality which resulted in no rate cuts being announced. Incidentally, the RBI’s regular MPC review is scheduled for March 31 to April 3, 2020.
On the ‘silver lining’ side, the RBI Governor also said was that the RBI has been taking some calibrated measures to ensure financial markets and institutions remain sound and resilient. He added that “the RBI has several instruments at its command and stands ready to take all necessary measures to mitigate impact of COVID-19 on Indian economy”. It was not just words; he also announced a slew of measures, including Rs 1 lakh crore LTROs, to ease liquidity.
How then, does one summarize the situation? The Indian economy is already under stress, something like the Corona Virus pandemic has the potential to bring economy on knees with lock down situation. Having said this, there is a ‘silver lining’; the RBI Governor also said “all options are open”. One takes this to mean it is a matter of timing; and that things will happen. So, India Inc. will wait for the ‘right timing’ and quick action by the RBI, with the added hope that it is taken at an ‘optimum response’ point of time.
Dr. Niranjan Hiranandani is President (National) NAREDCO as also President, ASSOCHAM