CII makes case for 50 bps rate by RBI amid coronavirus outbreak

Industry body CII on Monday urged the RBI to reduce the key lending rate (repo) by 50 basis points in addition to a bouquet of liquidity-enhancing measures as the coronavirus outbreak has endangered expectations of a global economic recovery.

Meanwhile, another industry chamber Assocham said an assertion by RBI Governor Shaktikanta Das that the central bank is ready to rise up to any situation arising out of the coronavirus outbreak should be "reassuring" to India Inc about stability of the Indian financial markets.

Coronavirus has endangered the expectations of a global recovery in 2020, emerging as the biggest global concern by crippling China and significantly impacting global supply chains, said CII Director General Chandrajit Banerjee in a statement.

Global policymakers are trying to support financial markets and the real economy through coordinated policy actions, he said adding that it is time for domestic policymakers also to join the coordinated policy response.

"We were buoyed by the bouquet of innovative measures introduced by RBI in its last monetary policy.

"The need of the hour is to continue with more such innovative steps apart from announcing a rate cut by at least 50 basis points," Banerjee said.

While further increase in quantum of liquidity support to be provided under the long-term repo operations (LTROs) is welcome, additional targeted liquidity support to sectors such as MSMEs is need of the hour, where problems have exacerbated due to the disruptions in global supply chains, he added.

Assocham Secretary General Deepak Sood said that in the midst of pressure on the currencies of the emerging markets and global mismatches in the dollar liquidity, the RBI is rightly and swiftly acting by different tools available to it, including the swap options.

"Our large resource of foreign exchange of USD 487 billion gives an adequate elbow room to the RBI to be on top of the fast-evolving situation in the world markets where there is a risk aversion as nations battle it out with the unprecedented pandemic," he said.

Sood further said both the RBI and the government are taking whatever it takes to mitigate the impact of the coronavirus even as certain segments of the economy like the tourism, trade and transport have come in under severe pressure.