The Ministry of Finance said on Friday that the reduction in the repo rate by the Reserve Bank of India will complement the recent measures it has taken to boost economic growth. Earlier in the day, the RBI reduced the repo rate, or the interest rate at which it lends to commercial banks, from 5.40% to 5.15%.
The reverse repo rate, too, was lowered to 4.90%. The reverse repo rate is the rate at which the central bank borrows money from commercial banks. The bank’s Monetary Policy Committee, however, retained its consumer price inflation forecast for the second half of the 2019-’20 financial year at 3.5%-3.7%.
The ministry said it had taken note of the revised growth projections by the Monetary Policy Committee, as well as those made recently by other bodies such as the International Monetary Fund and Asian Development Bank.
In July, the IMF had revised India’s Gross Domestic Product growth rate forecast for 2019-’20 to 7%, from 7.3%. Last month, the Asian Development Bank also slashed its projection for India’s economic growth in the ongoing fiscal year from 7% to 6.5%.
The Indian economy grew at just 5% for the April-June quarter, the slowest growth rate in over six years. Stung by the slowdown, Finance Minister Nirmala Sitharaman had in September announced a slew of measures to combat the slowing economy, including reducing corporate tax rate from 35% to 22%.
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