NEW DELHI (AP) — India’s central bank on Friday cut its key interest rate to 4% to counter the blow to the economy from the coronavirus pandemic and a lockdown meant to contain it.
Reserve Bank of India Governor Shaktikanta Das forecast that the economy will contract in fiscal 2020-21. He did not give a specific figure. The IMF earlier forecast that India’s economic growth will fall to 1.9% in 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 5%.
The Reserve Bank of India had reduced the interest rate to 4.4% from 5.15% in March to ease financing woes from the pandemic. The 4% rate announced Friday is the lowest the benchmark rate, the interest the central bank charges on lending to commercial banks, has been since March 2010.
In a policy meeting, the central bank said it would allow banks a 6-month moratorium on payments of installments on loans.
Das said data point to a collapse in demand in both the cities and the countryside, with plunging investment and consumer spending.
“High frequency indicators of service sector activity such as passenger and commercial vehicle sales, domestic air passenger traffic and foreign tourist arrivals also experienced sizeable contractions in March,” he said.
India’s merchandise trade slumped in April 2020, with exports shrinking by 60.3% and imports by 58.6%. There was a glimmer of hope, however, in a bumper winter crop of wheat and forecasts for a normal monsoon season in June-September, he said.
Das’s announcement followed the recent announcement of a 20 trillion rupee ($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 coronavirus.
The restrictions are scheduled to last through the end of May, but some have been relaxed, with shops gradually reopening and manufacturing and farming resuming. Train services and public transport have been partially restored, and domestic flights are expected to resume at one-third of capacity on selected routes from Monday.
7 Tech Stocks to Buy Now For a Post Coronavirus Economy
The Covid-19 pandemic has created a new “tech wreck”. But unlike the broad selloff at the end of 2018, this downturn has been more selective. Some stocks that looked like they were a little overbought have seen their share prices lowered.
In some cases, there was a legitimate reason for this. However, in other cases, it was likely a result of profit-taking disguised as something else. That’s the nature of a crisis. It gives investors the cover to do what they wanted to do anyway. But once investors start to sell, it can trigger a herd mentality.
And that’s when savvy investors start to look for opportunities. Because as Warren Buffett famously said, “Be greedy when others are fearful.” Tech stocks will lead the way back when the pandemic is over. Because if there’s one thing this moment in time is teaching us, it’s that we’re not going to be less dependent on technology. Businesses aren’t going to be doing less digital advertising. Consumers aren’t going to do less e-commerce.
But the fundamentals still matter. That’s why one of the common traits of many of these companies is that they have rock-solid balance sheets.
View the “7 Tech Stocks to Buy Now For a Post Coronavirus Economy”.
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