Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

Policemen watch as a health worker sprays disinfectant on a scooter coming out of a market during a government-imposed nationwide lockdown, in Chennai, India, on March 27, 2020.

ARUN SANKAR/AFP/Getty Images

India’s central bank slashed interest rates on Friday in an emergency move to counter the economic fallout from the coronavirus pandemic after the government locked down the country to slow the spread of infections.

Prime Minister Narendra Modi has asked India’s 1.3 billion people to stay indoors for three weeks in the world’s biggest lockdown, shutting down Asia’s third-largest economy and leaving millions of economically vulnerable people without work.

The Reserve Bank of India lowered the benchmark rate by 75 basis points to 4.40 per cent after a video conference meeting of its monetary policy committee, which was brought forward to respond to the crisis.

Story continues below advertisement

“Clearly a war effort has to be mounted and is being mounted to combat the virus, involving both conventional and unconventional measures in a continuously battle-ready mode,” RBI Governor Shaktikanta Das said.

The RBI cut rates as other countries across South Asia also sought to shore up their economies to withstand the crisis. The move came a day after the Indian government announced a US$22.6-billion stimulus plan to ease the pain of the poor through direct cash transfers and food security measures.

Even before the pandemic struck, India’s economy was struggling. Growth has probably weakened to at least an eight-year low this quarter, and is likely to slow even more sharply in the next six months, according to a Reuters poll of economists.

Mr. Modi, who has been under pressure to get growth going, applauded the interest rate cut.

“Today the RBI has taken giant steps to safeguard our economy from the impact of the coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses,” he said in a tweet.

India has reported 724 coronavirus cases, and 17 people have died, but there are fears the toll could overtake other hard-hit countries like the United States, China and Italy.

Mr. Modi and international experts have said that India faces a tidal wave of infections if it doesn’t take tough steps. But efforts to combat the spread of the virus are handicapped by limited medical facilities and inadequate supplies of testing kits, according to experts.

Story continues below advertisement

India is hoping that, if it can keep its people under lockdown until mid-April, it will be able stem transmission of the virus within communities. Officials say infections have so far been concentrated among people either coming from overseas or those who have had contact with them.

Other countries in South Asia, home to a fifth of the world’s population, have also been dragged into an economic crisis by the fallout from the pandemic.

Pakistan, where the number of coronavirus cases neared 1,300, has asked the International Monetary Fund for a fresh US$1.4-billion loan.

On Tuesday it cut its benchmark interest rate for the second time in a week, to 11 per cent, and announced measures to support the economy and poorer workers.

Bangladesh, the world’s second-biggest manufacturer of garments, has also said it might need help from the IMF and the World Bank. The country’s garment makers’ and exporters’ association said foreign buyers had either cancelled or suspended orders worth more than US$2-billion.

“Unfortunately, Bangladesh could lose 1.1 per cent of GDP growth due to the coronavirus crisis,” Finance Minister Mustafa Kamal said, citing an analysis from the Asian Development Bank.

Story continues below advertisement

“It is our request to the World Bank and the IMF to come up with greater support considering the ongoing crisis.”

Sri Lanka has asked for a moratorium on its international debt repayments.

For India, aside from desperation caused by lost jobs, the rapidly decelerating growth risked exacerbating an already critical problem of bad debts in the economy.

“The RBI has pulled out its bazooka,” said Prithviraj Srinivas, chief economist at Axis Capital in Mumbai.

“It has pulled down the cost of capital through deep policy rate cuts, it has increased the quantity of money through cash reserve ratio cuts and asset purchases, and more importantly reduced financial stress in the economy through its three-month moratorium on all term loans as well as working capital.”

The spread of the novel coronavirus that causes COVID-19 continues, with more cases diagnosed in Canada. The Globe offers the dos and don'ts to help slow or stop the spread of the virus in your community.

Sign up for the Coronavirus Update newsletter to read the day’s essential coronavirus news, features and explainers written by Globe reporters.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies