The COVID-19 pandemic is an invisible destroyer which needs to be captured quickly before it spreads and wreaks havoc on human lives and macro-economy, said RBI Governor Shaktikanta Das in the Monetary Policy Meeting on March 24-27.
The banking regulator’s panel said that COVID-19 had led to a range of a priori indistinguishable distress– a major slowdown in global demand, volatility in financial markets, a sharp drop in crude oil prices, and virtual stagnancy of global trade and travel.
In the ‘minutes of meeting’ report released on Monday, the central bank said it was significant to ensure finance and its seamless flow from several sectors, for the sustenance of the economy. The central bank committee, however, believed the macroeconomic basics of the economy were running normal.
Maintaining the stance that several indicators for the January-February, including IIP, exports, imports, PMI manufacturing, had shown immense growth, the MPC stated the previous data is now less relevant as the upcoming outlook due to COVID-19 had turned highly uncertain.
The RBI also said that the inflation had gone up and would likely relax below the target in the second half of 2020-21. “In the extreme scenario in which we are, however, the easing off of inflation may occur sooner and faster. This outlook offers the scope for taking a calculated risk on current levels of inflation,” the RBI said.
In the wake of COVID-19 pandemic, the MPC stated that several types of activities had halted due to social isolation, supply-disruptions, demand contraction and heightened anxiety. But the panel added the economic outlook was highly uncertain. “Prospects for the Indian economy now hinge around how pervasive and severe COVID-19 turns out to be, and how long it lasts,” it concluded.