By Sanjeev Miglani and Swati Bhat
NEW DELHI/MUMBAI (Reuters) - India's central bank slashed interest rates on Friday in an emergency move to counter the economic fallout from the coronavirus pandemic after the government locked down the country to slow the spread of infections.
Prime Minister Narendra Modi has asked India's 1.3 billion people to stay indoors for three weeks in the world's biggest lockdown, shutting down Asia's third-largest economy and leaving millions of economically vulnerable people without work.
The Reserve Bank of India lowered the benchmark repo rate by 75 basis points to 4.40% after a video conference meeting of its monetary policy committee, which was brought forward to respond to the crisis.
"Clearly a war effort has to be mounted and is being mounted to combat the virus, involving both conventional and unconventional measures in a continuously battle-ready mode," RBI Governor Shaktikanta Das said.
The RBI cut rates as other countries across South Asia also sought to shore up their economies to withstand the crisis. The move came a day after the Indian government announced a $22.6 billion stimulus plan to ease the pain of the poor through direct cash transfers and food security measures.
Even before the pandemic struck, India's economy was struggling. Growth has probably weakened to at least an eight-year low this quarter, and is likely to slow even more sharply in the next six months, according to a Reuters poll of economists.
Modi, who has been under pressure to get growth going, applauded the interest rate cut.
"Today the RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses," he said in a tweet.
SOUTH ASIA IN CRISIS
India has reported 724 coronavirus cases, and 17 people have died, but there are fears the toll could overtake other hard-hit countries like the United States, China and Italy.
Modi and international experts have said that India faces a tidal wave of infections if it doesn't take tough steps. But efforts to combat the spread of the virus are handicapped by limited medical facilities and inadequate supplies of testing kits, according to experts.
India is hoping that, if it can keep its people under lockdown until mid-April, it will be able stem transmission of the virus within communities. Officials say infections have so far been concentrated among people either coming from overseas or those who have had contact with them.
Other countries in South Asia, home to a fifth of the world's population, have also been dragged into an economic crisis by the fallout from the pandemic.
Pakistan, where the number of coronavirus cases neared 1,300, has asked the International Monetary Fund for a fresh $1.4 billion loan.
On Tuesday it cut its benchmark interest rate for the second time in a week, to 11%, and announced measures to support the economy and poorer workers.
BANGLADESH CALLS FOR HELP
Bangladesh, the world's second-biggest manufacturer of garments, has also said it might need help from the IMF and the World Bank. The country's garment makers' and exporters' association said foreign buyers had either canceled or suspended orders worth more than $2 billion.
"Unfortunately, Bangladesh could lose 1.1% of GDP growth due to the coronavirus crisis," Finance Minister Mustafa Kamal said, citing an analysis from the Asian Development Bank.
"It is our request to the World Bank and the IMF to come up with greater support considering the ongoing crisis."
Sri Lanka has asked for a moratorium on its international debt repayments.
For India, aside from desperation caused by lost jobs, the rapidly decelerating growth risked exacerbating an already critical problem of bad debts in the economy.
"The RBI has pulled out its bazooka," said Prithviraj Srinivas, chief economist at Axis Capital in Mumbai.
"It has pulled down the cost of capital through deep policy rate cuts, it has increased the quantity of money through cash reserve ratio cuts and asset purchases, and more importantly reduced financial stress in the economy through its three-month moratorium on all term loans as well as working capital."
(Additional reporting by Euan Rocha, Nupur Anand, Abhirup Roy, Alexandra Ulmer in Mumbai, Nivedita Bhattacharjee in Bengaluru; Ruma Paul in Dhaka and Gibran Peshiman in Islamabad; Editing by Simon Cameron-Moore and Pravin Char)