NEW DELHI: India’s rate-setters have decided to cut benchmark interest rates with price pressures remaining soft to support economic growth amid elevated US tariffs, minutes of the central bank’s policy meeting show.
The Reserve Bank of India’s (RBI) six-member monetary policy committee agreed to cut the repurchase rate by 25 basis points earlier this month.
The decision was unanimous, the minutes released last Friday showed.
Given the benign inflation outlook both for headline and core inflation, “real interest rates need to be lower”, governor Sanjay Malhotra said, adding that retaining a neutral stance “gives the requisite flexibility to remain data-dependent and act according to the evolving macroeconomic conditions and outlook”.
The consumer price index rose 0.71% in November from a record low in the previous month, leaving scope for further interest rate cuts in the new year.
The central bank has signalled its willingness to ease monetary policy further if inflation readings remain soft.
The RBI expects the price gauge to climb from January and sees the retail inflation rate averaging 2.9% in the three months through March.
Prime Minister Narendra Modi’s administration has stepped up efforts to shield the economy from the India-US trade stalemate, while bolstering the nation’s appeal as an investment destination.
It recently ushered in sweeping reforms ranging from the overhaul of India’s labour laws to financial services in order to attract investors.
At the same time, New Delhi is trying to repair bilateral ties with Washington and clinch a deal.
Malhotra’s deputy Poonam Gupta said that no new shocks have emerged on the global front since October.
Growth momentum is being sustained, while inflation is benign compared with earlier projections.
“When the prevailing inflation and its forecast is as low as it is currently, it alone ought to get a larger weight in the monetary policy deliberations,” she said. — Bloomberg
