Limited link with global value chain insulates India from virus impact

Mumbai: India has limited integration with the global value chain, which "insulates" its economy from the impact of the coronavirus epidemic, RBI Governor Shaktikanta Das said on Friday.

Das also pitched for launch of a "non-stigmatised currency swap line" by the International Monetary Fund (IMF) to provide liquidity to countries, and added that India's "robust" forex reserves of over USD 460 billion will ensure it does not face a liquidity problem.

Over 3,000 people have been killed globally because of the epidemic which has spread to about 60 countries, starting with China. The comments from Das come days after the RBI assuaged markets that it will do all it can to minimise the coronavirus impact.

Das said central bank governors of the IMF's member countries had held a teleconference, where it was decided to have a globally coordinated response to the crisis.

"India is not that much integrated into the global value chain as some of the other countries. To that extent, India remains insulated," Das said, addressing a summit by industry lobby Assocham here.

He said in India, there will be limited sectoral impact on industries that depend on Chinese raw materials or inputs, and added that sufficient measures are being taken to mitigate the same. "I am sure India will be able to respond to the challenges," he said.

At the global level, there is a need for the currency swap line to help nations access the international capital markets by providing the necessary liquidity, he said.

Pitching for the IMF to take the lead in the same, he said "this is also a part of IMF's mandate to maintain oversight of the international monetary and financial system."

He said while "robust" forex reserves will help India, the presence of such a line will prove to be the second line of defence for the country.

Das further said there has been a welcome increase in port activities in China in the last two weeks and it needs to be checked if the same can be sustained.

He added that the Chinese authorities are saying the coronavirus problem has peaked and it is now receding.

"What is important is a globally coordinated action and how we respond to the challenges. I am sure India will be able to respond to the challenges," he said.