Central banks have announced measures in recent months to tackle heightened global volatility and the economic fallout from the COVID-19 pandemic.
. Das added that the RBI has "several instruments at its command and stands ready" to take appropriate measures to mitigate any impact on the Indian economy.
The impact of COVID-19 on India's economy is still relatively mild. But even before the outbreak, quarterly expansion rates were alreadyRBI's monetary policy committee "does not have an explicit mandate to tackle financial stability risks, pushing it to act only when the growth risks are more visible," the Citi economists said, adding that could be why the central bank is "waiting to assess the spread of the virus in India and estimate its growth impact before acting.
They explained the possible reasons behind the RBI's decision to not announce any changes to the repo rate — or the rate at which it lends to commercial banks — this week. First, the consumer price index is still outside of the monetary policy committee's mandated band. The RBI's medium-term target for CPI inflation is 4%, within a band ranging from 2% to 6%. Second, the central bank is worried about the dollar/rupee impact of a rate cut and finally, "it is concerned about whether an inter-meeting action would signal panic," they said.
Still, Citi expects a 25 basis point cut in the April policy meeting; if the COVID-19 outbreak in India is very acute, then the RBI could make a 50 basis point cut. Chances of the RBI cutting rates outside of its scheduled policy meetings appear low, the Citi economists said.Nascent improvement in demand and manufacturing indicators in India are being threatened by the virus, economists at ANZ Research said.
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