Reserve Bank of India lowered interest rates to strengthen the economy as the global economic downturn threatens growth.
The Benchmark repurchase rate was cut to 6.75 percent from 7.25 percent, according to the statement released by the apex bank on Tuesday.
The Governor of Reserve Bank of India, Raghuram Rajan, while attending to the press said: “the weakening of global activity since our last review suggests that commodity prices will remain contained for a while”. It is important to note that domestic demand is needed to boost the national economy and substitute for weaker global growth, therefore, “monetary policy has to be accommodative in current conditions”.
In the days to come, investment is more likely to respond if there is more certainty regarding monetary stimulus in the pipeline, which would increase new job creation and assure investors of central bank commitment to the economy.
India is in a better economic position compared with other emerging markets, currently, growth is expected to surpass China this year, and with the announced rates cut investments inflow is expected to increase.
Reserve Bank of Indian forecasted 7.4 percent economic growth in the year through March 2016, and 7.8 percent in the next 12 months.
Finance Minister Arun Jaitley, said since inflation is under control and India needs lower interest rates to encourage capital investments and spur growth.
Indian S&P BSE 100 IDX rose 0.22 percent to 7,943.73 from 7,878.29 at 03:02:13 p.m. local time