Contingency plan needed to deal with impact of coronavirus: RBI Guv Das

Raising concerns over the spread of deadly coronavirus, RBI Governor Shaktikanta Das on Thursday suggested that a contingency plan should be prepared to deal with the impact of the virus on the economy.

Meanwhile, the RBI in a statement said the outbreak of coronavirus in China and its spread across geographies will impact tourist arrivals and global trade, and has triggered sell off in equity as well as crude oil markets.

The sixth bi-monthly monetary policy statement 2019-20 noted that global financial markets remained resilient in December 2019 and most part of January 2020 as thawing US-China trade relations and improved prospects of an orderly Brexit buoyed investor sentiment.

"Equity markets rallied across advanced economies and emerging market economies, turning bearish towards end-January with the outbreak of coronavirus as markets braced up for the likely adverse impact on growth prospects, particularly in China," it said.

However, equity markets in most economies recovered some of the losses in early February.

Talking to reporters, Das said the extent of impact of coronavirus is still uncertain and unfolding, as he made a case for preparing a contingency plan to deal with the situation and its impact on the economy.

The RBI statement further said crude oil and gold prices shot up in early January sparked by the US-Iran confrontation, but both softened from mid-January as geo-political tensions eased.

By end-January, crude oil prices dipped sharply due to sell-offs triggered by the outbreak of coronavirus. Gold prices, on the other hand, inched up towards end-January because of safe haven demand.

On domestic front, the RBI noted that likely increase in private consumption, easing of global trade tensions, and Budget initiatives may help in GDP growth, while the outbreak of coronavirus may impact the economic activities.

"The breakout of coronavirus may, however, impact tourist arrivals and global trade," the RBI said after a three-day deliberation of the rate-setting Monetary Policy Committee.

The coronavirus scare has affected air travel as several airlines across the world, including in India, have curtailed flight operations to China.

In the wake of the virus outbreak in Hubei province, India has also put restrictions on the movement of people to and from China, like many other countries, as part of precautionary measures to contain its spread.