India’s central bank cuts rate to stimulate economy

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The Reserve Bank of India Tuesday cut its short-term lending rate by 50 basis points to 6.75 per cent Tuesday.

The central bank’s move came as consumer price inflation eased to 3.66 per cent in August, its lowest since November 2014, giving the bank room to try to stimulate a sluggish economy.

The bank revised its growth target for the 2015-16 financial year to 7.4 per cent from an earlier projected 7.6 per cent.

It also adjusted the reverse repo rate to 5.75 per cent and kept the cash reserve ratio unchanged at 4 per cent.

“The Chinese devaluation had a tremendous impact on commodities and currencies and the global trend indicated an economic slowdown,” the bank’s governor Raghuram Rajan said.

“We felt a need to act within the room that we have,” Rajan said, explaining the 50-point rate cut. “In India, a tentative economic recovery is underway, but is still far from robust.”

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