Can RBI save the Economy?

You might have read a story in your childhood about 2 trees which faced a thunderstorm at the same time. One of them which had a nice built, stayed upright in pride while the other one was a bit flexible and started bending with the wind. The proud tree which was upright looked at the other one and laughed. It said “you’re dancing with the wind. Look at me, I’m strong and the strong wind can’t even move me.” The intensity of the wind increased and increased further. Slowly this tree started feeling the force and losing its balance. The other tree on the other hand kept dancing with the wind and stood its ground. Finally, when the thunderstorm’s intensity reached its peak, the stronger tree got uprooted. While, the flexible tree was still alive. With the relief package declared by RBI, our economy is probably showing the required flexibility to tackle the thunderstorm of Coronavirus.

RBI’s Relief

A day after the government announced a relief package, RBI Governor Shaktikanta Das addressed the media and made groundbreaking announcements. The RBI has cut the repo rate by 75 basis points. It has also asked all the lending institutions to allow a three-month moratorium on EMI payments to infuse liquidity into the system. The RBI Governor has clearly said that these are extraordinary conditions and therefore such steps are being taken to save the economy.

Economic Impact

A report from the United Nations says that the Indian economy might not suffer that much as compared to other countries post the Coronavirus saga. Economic Intelligence Unit (EIU) has also said that India will be among the fastest-growing G-20 economies (even though EIU downgraded India’s growth projection from 6% to 2.1%).

Now, you must be thinking that when all the global rating agencies have forecasted a downturn for India’s economy then how will the economy grow? Yes, the global rating agencies have indeed projected lower growth and they stand by their projections. But, let’s not forget that the entire world has got hit by the virus and other economies are expected to suffer more compared to India.

Conclusion

Coming back to the story of trees, we have to be flexible if we wish not to get uprooted. RBI’s relief package is trying to display that required flexibility. The economy is suffering due to COVID-19 and it will leave a drastic impact even after it’s over but, these steps will save us for the long term. Countries that did not announce lockdown in time are suffering tremendously and their death rates are heartbreaking. On the other hand India is well advancing towards ‘flattening the curve’ and protecting itself from the drastic impact that the virus could have. Hence, we could hope that our economy will relatively remain strong and prosper in the future with such measures.