RBI Chief Shaktikanta Das To Hold Briefing At 10 AM
RBI Governor Shaktikanta Das had cut interest rates by 75 basis points in late March. (File photo)
Reserve Bank of India (RBI) Governor Shaktikanta Das will address the media at 10:00 am. The press breiefing will take place days after Finance Minister Nirmala Sitharaman gave details of the Rs 20 lakh crore economic relief package announced by Prime Minister Narendra Modi to help the economy recover from the shocks linked to the coronavirus pandemic.
The Finance Minister, while giving finer details of the economic package, had indicated that the big sums that the centre has dropped into reviving businesses would eventually trickle down.
"It was important to give stimulus for businesses to start off. In PM Garib Kalyan scheme, introduced after the lockdown, we gave some cash transfer. (But) with that done, we weren't closing the option," Ms Sitharaman told news agency ANI.
"For cash transfer, we thought it was far more effective because the way in which we've planned it, we thought there'll be greater multiplier effect and therefore it should be through banks, businesses, through money given for working capital," she said.
But many economists, including former RBI Governor Raghuram Rajan, have called the stimulus inadequate in providing for recovery of an economy. "Only about 10 per cent of this stimulus can be traced as direct additional budgetary cost to the central exchequer," said D.K. Srivastava, chief policy adviser at EY India, was quoted as saying Bloomberg. "Nearly 5 per cent of the stimulus relates to already budgeted expenditures.".
The Indian economy is likely to suffer its worst quarter since the mid-1990s in the April-June quarter, shrinking 5.2%, reported news agency Reuters based on a poll.
The only way to boost demand may be lowering interest rates to boost consumption, analysts said.
"Inflation is expected to fall off sharply in coming months towards the 2% range ... Thus the RBI does have room to reduce rates," said Sameer Narang, chief economist at Bank of Baroda.
The RBI cut interest rates by a sharper-than-expected 75 basis points in the repo rate to 4.4 per cent in late March. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks.
"The government has taken good measures and we must ensure we do all we can to win this battle against the coronavirus. It is our duty to preserve financial stability, and contribute towards economic growth. Banking system in India safe; deposits safe in private bank; public should not resort to panic withdrawal," Mr Das had said in his last briefing.
"It remains to be seen how the RBI pushes for aggressive rate transmission, which still is at precariously low levels," analysts at Credit Suisse said in a note.