“The Reserve Bank of India (RBI) cut interest rates for a third time this year on Tuesday, taking advantage of subdued inflation to give more support to an economy that many economists doubt is doing as well as latest impressive growth numbers suggest,” The Times of India reports.
The RBI lowered the repo rate to 7.25 percent, as predicted by 35 of 48 analysts polled by Reuters.
“A repo rate cut of 25 bps was expected and already factored in by most of the market participants. It’s consistent with the RBI’s cautious stance, as it remains concerned about the monsoon outcome, geopolitical trends & U.S. Fed action. RBI’s future actions will be governed by not just the above stated points but also the government’s fiscal responses to adverse monsoon outcome and its efforts to push infrastructure growth,” Rupa Rege Nitsure, Group Chief Economist at L&T Financial in Mumbai said.
“Banks have started passing through some of the past rate cuts into their lending rates, headline inflation has evolved among the projected path, the impact of unseasonal rains has been moderate so far, administered price increases remain muted, and the timing of normalisation of US monetary policy seems to have been pushed back. With low domestic capacity utilisation, still mixed indicators of recovery, and sudu D investment and credit growth, there is a caw for a cut in the policy rate today,” RBI governor Raghuram Rajan said.
India, Asia’s third-largest economy grew 7.5 percent year-on-year in the last quarter. The result is better than China’s 7 percent growth in the same quarter. Last December quarter India also grew faster than China. However, on Friday the Central Statistics Office revised drastically growth down to 6.6 percent from 7.5 percent, distorting the picture of the actual trend.
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