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India Central Bank cuts interest rates to bolster growth
January 15, 2015, 5:05 am

Indian Prime Minister Narendra Modi said he’s ready to take unpopular steps to improve the nation’s economy and fiscal health [Xinhua]

Indian Prime Minister Narendra Modi has said he’s ready to take unpopular steps to improve the nation’s economy and fiscal health [Xinhua]

Amid a slide in the inflation rate, the Central Bank of India on Thursday decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent. Prime Minister Narendra Modi’s government had called for lower borrowing costs.

“It has been decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent with immediate effect,” the Reserve Bank of India said in a statement on Thursday.

The decision to reduce repo rate comes a fortnight ahead of the scheduled date of monetary policy announcement on February 3.

In a statement, the RBI cited lower-than-expected inflation, weak crude prices and weak demand as the reasons for its move, as well as the government’s commitment to sticking to a fiscal deficit target.

“These developments have provided headroom for a shift in the monetary policy stance,” it said.

The RBI has been keeping the benchmark interest rate at elevated level at 8 per cent since January 2014.

As India’s BRICS partners, China seeks to revive its economy with lower rates and Russia and Brazil raise them to fight inflation, the Indian Central Bank governor Raghuram Rajan’s middle path reflected his priority to reduce entrenched price pressures to lay the ground for stronger growth.

 

Source: Agencies