Coronavirus update: Modi govt explores spending boost to contain COVID-19 fallout

Prime Minister Narendra Modi’s administration is exploring options to shield India’s economy from the global outbreak of coronavirus as it attempts to shore up an economy that’s expanding at the slowest pace in 11 years, people with the knowledge of the matter said.

Officials have told the Prime Minister’s Office that apart from an increase in federal government’s spending, the Reserve Bank of India (RBI) could also exercise options ranging from interest rate cuts to boosting liquidity, the people said, asking not to be identified as a final decision hasn’t been taken yet.

Authorities estimate the virus will shave off about 30 basis points from the growth target. Growth was pegged at between 6%-6.5% in the year starting 1 April, prior to the outbreak. Officials are also considering cutting retail pump prices of gasoline and diesel to match the fall in crude oil prices instead of raising duties to bolster revenues, they said.

Countries around the world are taking measures to mitigate strains on their economies and financial systems as the World Health Organization declared the coronavirus outbreak a pandemic. The US suspended travel from Europe but stopped short of offering a detailed rescue package, even as Australia and the UK unveiled stimulus measures.

A spokesman at Modi’s office wasn’t immediately available, while the central bank’s spokesman declined to comment.

The government will suspend most visas starting Friday in a bid to contain the epidemic as India currently has 73 confirmed cases. The number of worldwide cases topped 124,000 and deaths exceeded 4,600.

Rupee slid to near a record low, while benchmark stock index plunged as much as 9% in Mumbai.