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Need monetary, fiscal measures to fight Covid-19 effects
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SME Times News Bureau | 18 Mar, 2020
A combination of monetary as well as fiscal policy could be the best
option to deal with the economic fallout of coronavirus, a State Bank of
India report said on Tuesday.
It said that on the monetary side,
the first best option is maintaining a proactive liquidity regime and
facilitating stability in financial markets through unconventional
measures.
The SBI Ecowrap report said: "The monetary stance may
be eased temporarily through a rate cut by the RBI to accommodate the
possible surge in liquidity demand and shock-related price increases.
"An adequate supply of cash notes to banks needs to be ensured that can meet a sudden increase in the demand for liquidity."
However,
the report pointed out that deposit and lending rate cuts beyond a
point is counterproductive and actually creates perverse flows into
liability products that are offering higher interest rates.
"This
could always be a recipe for future problems, if assets and liabilities
are not properly matched, as the experience of Yes Bank shows. Also,
pandemic shock has an embedded adverse supply shock angle as China is
the supplier of many critical inputs," the report said.
"Hence
only a rate cut in the current situation with no fiscal measures will
lead to asset bubble and possibly no correction in demand.
Concomitantly, there is a need to revive consumer demand."
In
addition, on the fiscal side, the report said that nearly 30 per cent
fall in crude oil prices could lower petrol prices by Rs 12 per litre
and diesel prices by Rs 10 per litre in India from their present prices.
"The
additional revenue accruing to Centre from increasing the excise duty
could be spent on providing relief to people at the lower strata who
will lose income because of shutdown of commercial activity in states,"
it added.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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