Reserve Bank of India Governor Shaktikanta Das has asked the International Monetary Fund (IMF) to consider launching non-stigmatised currency swap lines to ease possible liquidity and financing constraints for countries that have been adversely affected by coronavirus (COVID-19). It will also preserve their access to international capital markets.
“The point is a coordinated swap line will act as a second line of defence to bolster national reserves across countries and strengthen their individual abilities to safeguard against risks that coronavirus may entail,” Das said.
He stressed that a swap line was critical from the point of view of preserving global financial stability. The global economy has been hit hard by COVID-19. According to IMF projections, the outbreak’s impact on the global economy will be 0.1 per cent and 0.4 per cent on the Chinese economy.
As far as India is concerned, Das said, “India will be able to respond to whatever challenges emerge out of the coronavirus problem. We don’t have a problem because our foreign exchange reserves are quite robust”.
Although India is much more integrated with the global economy than it was 10-20 years ago, it is not as integrated in the global value chain as some other countries. So, to that extent, India remains insulated, he said.
However, certain sectors will face challenges because they export to China. But talks have taken place between the various stakeholders and steps are being taken to mitigate the likely problems that these sectors face.
The governor also reiterated that RBI will take every measure needed to secure the economy against the challenges arising from COVID-19.
Earlier, it had issued a statement saying it was ready to take steps to ensure that markets run well and confidence is maintained. RBI is monitoring global and domestic developments. Globally, financial markets have been experiencing considerable volatility, with the spread of COVID-19 making investors risk averse and prone to banking on safe havens. Spillovers to financial markets in India have largely been contained, the RBI had said.