The Monetary Policy Committee (MPC) has said that the reduction in repo rate is to aid domestic growth and encourage private investments in the country.
New Delhi: The Reserve Bank of India has cut down the key repo rate by 25 basis points to 6% in their first annual bi-monthly monetary policy meet of the financial year.
The Monetary Policy Committee (MPC) has said that the reduction in repo rate is to aid domestic growth and encourage private investments in the country.
MPC voted 4:2 in favour of the repo rate change and the reverse repo rate has also been reduced to 5.75%. GDP growth predictions have also been lowered and the expected growth rate for the fiscal year 2019-20 is projected at 7.2% as opposed to earlier when it was expected to be at 7.4%.
In the second half of FY20, GDP growth rate is expected to be at 7.3-7.4%.
Chief economic advisor for the SBI on monetary policy changes, Soumya Kanti Ghosh had earlier said, “In terms of the stance, I think given the current growth condition, given the fact that growth is going to remain weak for the next couple of quarters, I think you need to cut rates given that you have to do the heavy lifting to the monetary policy and possibly one rate cut will not suffice, possibly a larger rate cut will suffice.
even if you want to cut it by larger than 25 bps, you need to change your stance or even if you want to cut by 25 bps, you have to give a clear signal to the market that we are here for a dovish policy. So in that case also, I think there is a strong case for changing the stance from neutral to accommodative”.
RBI has maintained its stance at neutral even after the repo rate cut. Shaktikanta Das, RBI governor has said that the evolving macroeconomic trends will be observed and action will be taken as required.
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