India cuts interest rates to shore up Covid-19 ravaged economy

India cuts interest rates to shore up Covid-19 ravaged economy

India’s central bank on Friday cut its key interest rate to 4% to revive the economy severely hit the Covid-19 outbreak and a two-month lockdown.

Reserve Bank of India Governor Shaktikanta Das also said India’s gross domestic product in financial 2020-21 was expected to have negative growth.

The bank held a monetary policy committee meeting and discussed stops to cope with the disruptions to the economy.

The bank already had reduced the interest rate to 4.4% from 5.15% in March to ease financing troubles caused by the coronavirus outbreak.

The 4% interest rate announced on Friday will be the lowest benchmark rate the RBI charges on lending to commercial banks, its so-called “repo rate”, since March 2010.

Indians, some of them wearing masks, walk past a cafe frequented by tourists currently remaining closed (RS Iyer/AP)
Indians, some of them wearing masks, walk past a cafe frequented by tourists currently remaining closed (RS Iyer/AP)

The RBI will also allow banks a six-month moratorium on payments of instalments on loans.

The announcement comes days after the federal government announced a 20 trillion rupee (266 billion US dollar) fiscal and monetary package to support the ailing economy.

Millions of workers have fled cities after they lost their jobs following the lockdown to curb the spread of coronavirus.

The lockdown is scheduled to last through May, but life is slowly picking up with shops reopening and manufacturing and farming resuming.

Rail services and public transport have been restored partially, and domestic flights are expected to resume at one-third of capacity on selected routes from Monday.

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