RBI cuts repo rate by 35 basis points in bid to revive declining growth

The Reserve Bank of India (RBI) cut the repo rate for the fourth time this year by 35 basis points or 0.35 percentage point to 5.40 percent.  This is the lowest in nine years, in attempts to spur economic growth.

The cut on the repo rate is likely to make equated monthly installments (EMI) for home and other loan borrowings cheap. The decision of India’s Monetary Policy Committee (MPC) was made by Governor Shaktikanta Das.

The decision of the MPC to cut repo rate was unanimous, with four members voting to cut the rate by 35 basis points and the rest voting for a 25 basis-points reduction.

The Reserve Bank of India cut gross domestic product (GDP) growth target for current financial year to 6.9 percent from 7 percent in the June policy. The range of GDP growth is projected at 5.8-6.6 percent for first half of 2019-20, and 7.3-7.5 percent for second half “with risks tilted to the downside”, the Reserve Bank of India said in its third bi-monthly policy statement of the current financial year.

The last time the RBI made so many back-to-back cuts was after the global financial crisis over a decade ago.

The Indian stock market responded positively to the rate cuts. BSE Sensex and NSE Nifty 50 were about 0.9 percent and 0.8 percent on the higher side after successive slides.

The rate cuts definitely shows RBI’s concern over the declining Indian economy, however maintained its “accommodative” stance. The urgent measures shows that the central bank is trying to  revive growth.

Source : Various