Reserve Bank of India’s Pandemic Responses

Extraordinary time requires extraordinary policy responses. As the Reserve Bank of India Governor Shri Shaktikanta Das puts it upfront, RBI has responded to a pandemic with “whatever it takes to” narrative and has done “heavy lifting” in terms of policy rates adjustments, liquidity infusion, and the regulatory mechanisms. The covid-19 is a dual crisis - a public health crisis and a macroeconomic crisis. Through the Great Lockdown strategy, we have systematically flattened the curve and moving towards growth recovery. However, strengthening fiscal and monetary linkages is crucial for the sustainability of the economic recovery. The pandemic economics of central banks is twofold. One is the focus on measures that relate to instantaneous economic “firefighting”: for instance, how to adjust the policy rates and also to ensure liquidity infusion into the system to stabilize the market reactions. The second is the long-term policy imperatives, including the regulatory mechanisms. As this crisis is of an unprecedented scale, it calls for unprecedented policy responses. The central banks have responded to the crisis within a “life versus livelihood” framework. This paper analyses the pandemic responses by the central bank of India and its new monetary policy framework of inflation targeting; and concludes with policy suggestions.