Coronavirus outbreak to have limited impact on India, says RBI Governor
Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the coronavirus outbreak will have limited impact on India, but global growth will be hit.
India’s pharmaceutical and electronic manufacturing sectors are dependent on China for inputs and they may be impacted, said Das.
“Most of the large pharma companies, according to information that we have, always keep stock for three-four months. Therefore, they should be able to manage and also those provinces from where these pharma intermediates are sourced have not been impacted by the virus outbreak. Therefore, there is an expectation that the supply of pharma raw materials will be maintained,” he said.
“It is definitely an issue which needs to be closely monitored by every policymaker whether in India or any other country. Every policymaker, every monetary authority needs to keep a very close watch. So coronavirus issue needs to be closely watched,” he said.
The RBI governor said that the coronavirus outbreak appears to be larger than SARS and this time China’s share in world GDP and world trade is much higher. “So, the coronavirus will definitely have an impact on the global GDP and global trade,” he said.
The Japanese yen had hit a nine-month low over the news of the spread of coronavirus (now known as Covid-19) across the countries in the world.
The outbreak is expected to shave up to 0.2 percentage points off Japan’s economic growth this year as it hits exports, factory output and tourism, a Reuters poll of analysts showed last week.
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The euro bounced briefly above $1.08 but sank below the mark to trade flat as the dollar continued its rally. The single currency had earlier fallen to a three-year low after a survey showed weakening confidence in Germany. One-month euro-dollar implied volatility rose to its highest in six weeks.
On Tuesday, Germany’s ZEW research institute had said in its monthly survey that investors’ mood had deteriorated far more than expected in February, on worries coronavirus would curtail world trade.
Italy’s Economy Minister Roberto Gualtieri said that the country’s 2020 growth forecast may be revised down if there is a significant impact from the coronavirus outbreak.
“The 0.6% (GDP growth for 2020) could be revised down if the coronavirus will have a significant impact and if there is a stronger than expected drag effect of the 2019 GDP decline over the current year,” Gualtieri said on Wednesday in a interview with Radio Capital.
The virus outbreak, which originated in China in December last year, has killed more than 2,000 people, and caused huge disruptions in movements of goods and people.
“If global supply chain disruptions and travel restrictions are prolonged, the impact will become bigger. But if things stabilise in about two months, the damage will be limited,” said Mari Iwashita, chief market economist at Daiwa Securities.
Finance Minister Nirmala Sitharaman had on Tuesday met representatives from various sectors, including pharmaceuticals, textiles, chemicals, electronics and IT hardware, solar, auto, surgical equipments, and paints, to review the situation following the outbreak of the deadly virus in China.
She said the government will soon announce measures to deal with the impact of the coronavirus outbreak on the domestic industry.
The Sensex rebounded over 428 points on Wednesday, snapping four days of losses, as investors took heart from a decline in new coronavirus cases in China and the Indian government’s assurance on tackling the economic impact from the virus epidemic.