The Central Bank of India has reduced interest rates for the first time in almost five years to counter the growth of the third Asian economy.
The Reserve Bank of India (RBI) reduced its repo rate by 6.5% to 6.25%, in accordance with the expectations of many economists.
The repo rate is the level at which the central bank lends to commercial banks.
The latest reduction occurs when the GDP growth in India is observed slowing down to a four -year lower by 6.7%.
RBI Governor Sanjay Malhotra said that the bank maintained its “neutral” political position, which would open more space to support growth, signaling new rate cuts.
Investment growth and urban consumption in the main major economy for the fastest growth in the world have been erased. Business benefits also decreased in the first half of this exercise.
But the moderation of inflation, an increase in rural demand and good agricultural production will contribute to growth, said Malhotra.
The drop in rates could cause mortgage interest rates and slightly reduced credit card as well as cheaper borrowing costs for businesses.
The reduction of the central bank prices follows a range of measures announced above, including an injection of $ 18 billion (14.48 billion pounds sterling) in the national banking system, to facilitate a cash shortage in the ‘economy.
He had also reduced the cash reserve ratio – or the reserves that commercial banks must maintain with the RBI – half -for a hundred in December.
The RBI rate decision follows the drop in tax of $ 12 billion in the Union budget for the middle class in difficulty.
Despite this, Mr. Modi’s government aims to limit expenses to reduce the budget deficit. With a limited place for the budget recovery, economists expect the central bank further reduced rates from 0.5% to 1% to support growth, according to various estimates.
However, the global uncertainties due to the pricing war of US President Donald Trump, an exit from foreign investors’ money and a depreciating currency – which could still weaken if the rates drop – have complicated the task of RBI.
The Indian roupine is negotiated near low records due to heavy overflows of foreign investors in stock markets in recent months.
