Nirmala Sitharaman calls FSDC panel meeting on Thursday, to discuss impact of COVID-19 on economy

New Delhi: Finance Minister Nirmala Sitharaman has called a meeting of the Financial Stability and Development Council (FSDC) on Thursday, which among other things will discuss the impact of COVID-19 on the financial sector and the economy. This will be the first meeting of FSDC, which comprises RBI Governor and other financial sector regulators, since the outbreak of coronavirus. The FSDC meeting, to be chaired by the finance minister, will be held via video conference, sources said.

The meeting will take place against the backdrop of India staring at the risk of contraction in the economy during the current financial year due to the COVID-19 crisis.

This would be the third meeting of FSDC after the Modi 2.0 government assumed office. Besides the RBI Governor, the members of FSDC include chairpersons of the Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority. Senior officials of the finance ministry will also attend the meeting. The council is expected to review various aspects associated with the Rs 21 lakh crore stimulus package announced by the government on May 12 to help the nation tide over the economic crisis induced by the coronavirus and the lockdown to curb its spread. The mega economic package includes the Reserve Bank’s Rs 8.01 lakh crore worth of liquidity measures. Sitharaman had announced this economic package in five tranches, which included a Rs 3.70 lakh crore support for MSMEs, Rs 75,000 crore for NBFCs and Rs 90,000 crore for power distribution companies. Besides, free foodgrains to migrant workers, increased allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), tax relief to certain sections and Rs 15,000 crore allocation to the healthcare sector to deal with the pandemic, were also announced as part of the economic package. According to sources, various measures announced by the Reserve Bank of India since February and its impact on boosting the economy and sentiment will also be deliberated during the FSDC meeting. The RBI last week said the impact of COVID-19 is more severe than anticipated and the GDP growth during the current financial year is likely to remain in the negative territory. It projected some pick-up in growth impulses from the second half (October-March) of 2020-21 onwards. On Tuesday, rating agencies Fitch and Crisil drastically cut India’s economic growth forecast for the current fiscal year due to a prolonged lockdown. Fitch forecast 5 percent contraction in 2020-21, a sharp decline from 0.8 percent growth projected by the global rating agency in late April. Crisil also predicted the economy to shrink by 5 percent in the current fiscal. Earlier, it projected a growth of 1.8 percent. The first case of coronavirus in India was detected in late January.