The Central Bank of India cuts the lending rate to 4% to help the economy | business news

NEW DELHI (AP) — India’s central bank cut its key interest rate to 4% on Friday to offset the blow to the economy from the coronavirus pandemic and a lockdown aimed at containing it.

Reserve Bank of India Governor Shaktikanta Das has forecast that the economy will contract in fiscal year 2020-21. He did not give a specific figure. The IMF earlier forecast India’s economic growth to fall to 1.9% this fiscal year from 4.2% in 2019 and 6.1% in 2018. Some private sector economists expect it to contract by as much as a 5 %.

The Reserve Bank of India had cut the interest rate to 4.4% from 5.15% in March to ease financial problems from the pandemic. The 4% rate announced Friday is the lowest benchmark rate, the interest the central bank charges on loans to commercial banks, since March 2010.

At a policy meeting, the central bank said it would allow banks a 6-month moratorium on loan installment payments.

Das said the data points to a collapse in demand both in cities and in the countryside, with investment and consumer spending falling.

“High-frequency indicators of service sector activity, such as commercial and passenger vehicle sales, domestic passenger air traffic, and foreign tourist arrivals, also saw significant contractions in March,” it said.

India’s merchandise trade plummeted in April 2020, with exports down 60.3% and imports down 58.6%. However, there was a glimmer of hope in a bumper winter wheat crop and forecasts for a normal monsoon season in June-September, he said.

Das’s announcement followed the recent announcement of a 20 trillion rupees ($266 billion) fiscal and monetary package to support the economy. Millions of workers have fled cities after losing their jobs as authorities imposed lockdowns to curb the spread of the coronavirus.

Restrictions are set to last until the end of May, but some have been eased, with shops gradually reopening and manufacturing and farming resuming. Train services and public transportation have been partially restored and domestic flights are expected to resume at one-third capacity on select routes beginning Monday.

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