RBI Cuts Repo Rate by 25 Basis Points, Projects GDP Growth at 7.2% for 2019-20

File photo of RBI Governor Shaktikanta Das.

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New Delhi: The Reserve Bank of India Thursday cut benchmark interest rate by 0.25 per cent for the second time in a row to bring interest rate to the lowest level in one year on softening inflation. The rate cut was widely expected to boost the economy.

The central bank, however, kept monetary policy stance at ‘neutral’.

In the second policy review under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut. The benchmark interest rate was cut by 0.25 per cent to 6 per cent, a move that will result in lower cost of borrowing for the banks that are expected to transmit the same to individuals and corporates.

The RBI had on February 7 had last cut interest rate to 6.25 per cent from 6.5 per cent.
Last time repo rate stood at 6 per cent was in April 2018.
The rate cut is in consonance of achieving the medium term objective of maintaining inflation at the 4 per cent level while supporting growth, RBI said in a statement.

Several analysts, however, believed that country’s weakening economic growth and subdued inflation outlook warrant a larger reduction but expected the RBI to remain cautious given uncertainty over who will lead the government after the coming election and what their fiscal policy will be.

Campaigning for votes, political parties have been promising dole-outs including direct cash payments to poor people if they win power, stoking potential inflation fears.

The inflation outlook could also be upset by the perennial risk of sharply higher food prices if the monsoon season rains disappoint, as has been predicted by Skymet.