The Reserve Bank of India moves to support economic growth as weak inflation takes its toll on Asia’s third-largest economy.
India’s central bank has cut its core interest rate for the fourth time this year as it looks to help kick-start economic growth.
The benchmark repo rate – the level at which it lends to banks – was slashed by 50 basis points to 6.75% by the Reserve Bank of India (RBI).
It was the most aggressive of the RBI’s rate reductions, following three previous cuts of 0.25%, and reflected growing concern that the country’s economic recovery was running out of steam.
The RBI was under pressure to act as falls in inflation gather pace – with the annual rate hitting a near-year low of 3.6% in August versus a target of 6%.
Economic growth was last measured at an annual rate of 7% – down from 7.5% in the previous quarter.
In announcing the monetary policy response, RBI governor Raghuram Rajan said the central bank had also lowered India’s growth forecasts.
“A tentative economic recovery is underway, but is still far from robust.
“Investment is likely to respond more strongly if there is more certainty about the extent of monetary stimulus in the pipeline, even if transmission is slow.
“Therefore, the Reserve Bank has front-loaded policy action by a reduction in the policy rate by 50 basis points.”
The bank highlighted a number of risks, including the slowdown in emerging markets as trade weakens.
Source: SKY NEWS