Jan. 31 – In a move that hopes to kick-start India’s flagging economy, the Reserve Bank of India (RBI) has lowered the nation’s interest rates from 8 percent to 7.75 percent. This marked the first time since April of last year that rates have been reduced, and only the second time in the past four years.
“It is critical now to arrest the loss of growth momentum, without endangering external stability,” the RBI said in a statement.
The inflation projection for March was reduced from 7.5 percent to 6.8 percent, granting the necessary space for a slight cut to interest rates. However, while inflation has stabilized to a three-year low, the RBI has warned that the possibility of further rate cuts this year is low.
“There is an increasing likelihood of inflation remaining range-bound around current levels going into 2013-14. This provides space, albeit limited, for monetary policy to give greater emphasis to growth risks,” said the Governor of the RBI, Duvvuri Subbarao.