The Reserve Bank of India Governor Shaktikanta Das on Wednesday announced new loan relief and a INR 500 billion ($6.75 billion) injection of liquidity to help the Indian economy endure a flood of COVID cases that could deal a setback to the country’s nascent recovery.
The benchmark Bombay Stock Exchange was up by 0.8% near the end of the day’s trading, following the central bank announcement.
The second wave of COVID hitting India has inundated its hospitals, locked down sections of the country, and forced Indians to plead on social media for oxygen and medical supplies for sick family members. On Wednesday, the country recorded 382,000 cases and a record death toll of 3,780 in a single day.
Subscribe to Eastworld for weekly insight on what’s dominating business in Asia, delivered free to your inbox.
The business community is pressuring Prime Minister Narendra Modi to impose wider lockdowns to try to stem the virus’s spread.
“The immediate objective is to preserve human life and restore livelihoods through all means possible. The second wave, though debilitating, is not insurmountable,” Das said in an unscheduled address.
Das announced that commercial banks can borrow from the central bank to extend loans worth INR 500 billion ($6.75 billion) to the health care sector, including vaccine makers and those providing critical medical services, through March 31 of next year.
India’s health care network is on the brink of collapse in the worst-hit provinces, where hospitals have run out of critical care beds, oxygen supplies, and medicine.
The central bank also said that small and medium borrowers that didn’t take advantage of a prior debt restructuring program can delay for two years their repayment on loans of up to INR 250 million ($3.37 million).
The bank also gave state governments access to a loan overdraft facility for 50 days, up from an earlier 36 days.
The ongoing outbreak, fueled by a highly infectious mutant variant, is straining the finances of state governments. Under a new federal policy, states will have to procure vaccines on the open market if they need more than what is provided from a federal pool of supplies.
Even as he introduced the new measures, Das expressed optimism about the resilience of the Indian economy, which he said will emerge from the pandemic as one of the world’s fastest growing.
Following one of the world’s strictest lockdowns in 2020, India’s economy shrunk by 8% in the past fiscal year ended in March, according to the government.
The Reserve Bank of India on Wednesday did not alter its GDP growth projection of 10.5% for the current fiscal year, which is due to be reviewed by its monetary committee in the first week of June.
Das said the forecast of a normal monsoon season—which brings around 70% of the country’s annual rainfall—will help sustain rural demand and overall output. Expectations of a good crop are likely to cool inflation, he added.
India harvested a record crop last year, making it a vital supplier of rice to parts of the world, such as western Africa, that face food scarcity following the pandemic.
The rural sector accounts for the largest segment of India’s workforce. Unlike last year’s COVID wave, however, the current outbreak has spread from cities to villages, putting the rural population—and its output—at risk.
More health care and Big Pharma coverage from Fortune:
- The COVID vaccine is set to make up more than half of Pfizer’s 2021 revenue
- Pfizer’s COVID-19 treatment pill could be available by year’s end
- Forget vaccine jabs—next-generation COVID-19 pills and nasal sprays are on their way
- We probably won’t reach COVID herd immunity. So why are states already reopening?
- T-shirts, bonuses, and paid time off: How companies are incentivizing workers to get a COVID vaccine as new guidance looms
Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.
