सिंहदरबार संवाददाता
Kathmandu. India’s central bank cut interest rates for the first time in nearly five years on Friday as concerns about a growth slowdown in the world’s fifth-largest economy outweighed inflation risks. The Reserve Bank of India (RBI) said it would cut the repo rate, the base rate at which commercial banks lend, by 25 basis points to 6.25 percent.
The world’s major central banks cut rates last year. Some have continued to do so, but sluggish inflation has prevented India from doing so. Retail inflation in the country has recently eased. It fell to a four-month low of 5.22 percent in December but is still above the central bank’s medium-term target of 4 percent. The easing of price pressures now seems to provide room for a focus on boosting growth.
India’s economy expanded more slowly than expected in the September quarter, driven by sluggish manufacturing and weak urban consumption. After growing more than 8 percent last year, it is expected to expand at its slowest pace this fiscal since the COVID-19 pandemic. RBI Governor Sanjay Malhotra, in his first monetary policy review, said inflation is “expected to moderate further in 2025-26” and, while improving from the September quarter low, it remains “significantly lower” than last year.
“Given the current growth-inflation dynamics, a less restrictive monetary policy is more appropriate at this time,” he said. Malhotra has adopted a less hawkish approach than his predecessor Shaktikanta Das. Das raised rates by 2.5 percentage points between May 2022 and February 2023 to combat inflation. The bank last cut rates in May 2020. The RBI’s decision comes less than a week after the government announced sweeping income tax cuts in its annual budget to put more money in the hands of consumers hit by high food prices and weak wage growth.
India’s economy grew by 5.4 percent in the September quarter. This was its worst performance in seven quarters and below analysts’ expectations of 6.5 percent. While this figure makes India one of the world’s fastest-growing major economies, it also signals a slowdown in the rapid expansion seen throughout much of 2023 and 2024.
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