The Reserve Bank of India (RBI) has made a significant move by cutting its benchmark interest rate for the first time in almost five years. This decision comes as India, the world’s most populous nation, faces a slowdown in economic growth.
On Friday, the RBI reduced the repo rate by 0.25 percent, bringing it down to 6.25 percent. The repo rate is what the central bank charges commercial banks for borrowing money. The last time the RBI lowered this key interest rate was in May 2020. Since then, the bank has been increasing rates to combat rising inflation following the COVID-19 pandemic.
Governor Sanjay Malhotra, who took over leadership in December, emphasized that a more flexible monetary policy is needed right now to support economic growth without ignoring inflation. He explained that the RBI aims to maintain price stability and ensure financial stability while promoting sustainable economic growth.
Despite being one of the fastest-growing major economies, India’s growth rate has slowed. For instance, in the July-September quarter, the GDP increased by only 5.4 percent compared to 6.7 percent in the previous quarter. The government has projected a growth rate of 6.4 percent for the fiscal year 2024/25, which would mark the lowest performance since the COVID-19 pandemic, when the economy took a serious hit.
The Indian government also recently introduced significant tax cuts. They raised the income threshold for taxes from around $8,000 to $14,800, aiming to ease the financial burden on workers.
These economic measures reflect the government’s and the RBI’s efforts to ignite growth in a challenging economic environment.
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Economy, Business and Economy, Asia, India
