RBI governor Shaktikanta Das announced a slew of measures in a third press conference since the coronavirus lockdown. The Indian economy may recover in the third quarter and will gain momentum in the fourth quarter.
Measures announced in Press Conference
- Shaktikanta Das announced that RBI reduced the Repo rate by 40 basis points from 4.4% to 4%.
- It is extending the moratorium on all term loan repayments by another three months that is till August 31.
- Increase of Rs 15,000 crore line of credit to EXIM Bank for 90 days.
- A credit line worth 15,000 crores will be extended to SIDBI for another 90 days.
- Shaktikanta Das also announced an extension of the maximum permissible period of pre-shipment and post-shipment export credit to 15 months.
- Permitted banks to extend margins on working capital facilities to original levels by March 31.
- Increasing group exposure limits of banks have been increased from 25 per cent to 30 per cent of eligible capital base till June 30, 2021.
- To ease market borrowings of states by 45%, RBI relaxed withdrawal rules for the Consolidated Sinking Fund.
- Global Exposure Limit increased to 30% from 25% of eligible capital base to ease corporates funding requirement.
Growth Outlook of Domestic Economy
Shaktikanta Das confirmed that the Industrial production dipped by 17% in March with manufacturing activity down by 21%. Also, the output of core industries has contracted by 6.5%. India’s forex reserves have increased by USD 9.2 billion since April 1 to USD 487 billion. The RBI projects that GDP growth in 2020-21 will remain in negative territory.
However, food grain production rose 3.7 per cent to a new record. Besides Kharif sowing was higher by 44 per cent as against last year’s acreage. Das indicated a further rate cut depending on the situation.
Measures so Far
RBI had already announced a three-month moratorium to be given by banks to the borrowers. Besides, it had slashed the benchmark interest rate (repo rate) by a massive 75 basis points. The Finance Minister to hold a review meeting with CEOs of PSBs to discuss matters including loan disbursement, as a part of efforts to revive the economy.
Global Economic Conditions
While global markets have dwindled, macro-economic conditions are severe. Moreover, the global manufacturing PMI has contracted to 11 years low in April. WTO projects that the volume of world trade this year can shrink by 13 to 23%.
In all, the measures announced by Shaktikanta Das will instil confidence in the markets, ease financial conditions, and support exports and imports.