The Reserve Bank of India (RBI) delivered a third consecutive rate cut in five months in an effort to boost credit growth and revive the sluggish economic activity in the country.
The six-member Monetary Policy Committee (MPC), on June 6, voted in favour of an aggressive 25 basis points reduction in the key policy rate. One basis point is a hundredth of a percentage point.
The RBI’s repo rate now stands at 5.75 percent, its lowest since April 2009. The repo rate is the rate at which commercial banks borrow from the RBI.
India’s GDP growth hit a five-year low of 5.8 percent in January-March quarter as the slowdown in all key sectors of agriculture, industry and manufacturing raised concerns on the underlying weakness in the economy.
The retail inflation, gauged by the Consumer Price Index (CPI), hit a six-month high on the back of rise in food prices. It stood at 2.92 percent in April, which is within the MPC’s mandate. However, a shortfall in monsoons could further push food prices up going forward.
The India Meteorological Department (IMD), on June 5, said that the southwest monsoon was likely to get delayed and hit the Kerala coast on June 8, as compared to the normal onset date of June 1. The IMD expects India to receive normal monsoons at 96 percent of the 50-year long-term average (LPA) of 89 cm.
However, private forecaster Skymet has pegged below normal monsoon rains for 2019, with rainfall seen at 93 percent of the LPA.
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