India’s central bank slashes interest rates as virus spreads

India’s central bank cut interest rates sharply Friday as the coronavirus outbreak deepens fears for Asia’s third largest economy, which was already battling a prolonged slowdown.

The move followed similar measures around the world as finance chiefs battle to stave off would could be the worst economic crisis in decades.

As manufacturing activity and consumption grinds under a lockdown, the Reserve Bank of India (RBI) said the benchmark repo rate — the level at which it lends to commercial banks — would be cut by 75 basis points to 4.40 percent.

The bank also cut the reverse repo rate, the rate at which it borrows from commercial banks, by 90 basis points.

“This kind of uncertain outlook has never been seen before… finance is the lifeline of the economy and keeping it active is of paramount importance for the RBI,” central bank governor Shaktikanta Das said in a surprise announcement in Mumbai.

He added that India needed conventional and non-conventional measures to tackle the unprecedented situation depending on the spread, intensity and duration of the outbreak.

India has so far registered 694 cases for its 1.3-billion strong population but experts believe the numbers could rise exponentially in the weeks ahead.

Earlier this week, the government imposed strict restrictions asking citizens to stay indoors, only allowing essential services to function

Das said India would struggle to achieve fourth-quarter growth projections of 4.7 percent as major global economies faced the risk of recession.

The bank last slashed its rates by 75 points in November 2008, during the global financial crisis. 

Analysts say India’s economy is likely to see its lowest annual expansion since that year, as the virus batters its industries.

India on Thursday announced an economic welfare package of 1.7 trillion rupees ($22.54 billion) to help its poorest citizens with direct cash transfers and food subsidies for three months.

After Das’s announcement, shares on the Bombay Stock Exchange Sensex Index rose almost one percent, while the Nifty 50 jumped by almost two percent.