India Cuts Interest Rates for First Time in Five Years

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FEB 7

Image copyright: Unsplashstory last updated FEB 9

The Facts

The Reserve Bank of India (RBI) on Friday reduced its benchmark repo rate by 25 basis points to 6.25%, marking the first rate cut since May 2020.
RBI Governor Sanjay Malhotra said that a less restrictive monetary policy was appropriate given current growth-inflation dynamics and that the Monetary Policy Committee maintains a neutral policy stance.
The rate cut follows the government's recent announcement of significant tax cuts, raising the income tax threshold from $8K to $14.8K to stimulate consumer spending and economic growth.

The Spin

Narrative A

The rate cut is necessary to revive economic growth and boost urban consumption. It complements recent tax measures and supports credit flow to businesses — particularly as high-frequency indicators suggest economic resilience despite global challenges.

Reuters Firstpost

Narrative B

The decision to cut rates amid persistent inflation above target levels and currency pressures could risk further price increases and capital outflows, potentially complicating the central bank's efforts to maintain financial stability.

BBC News Dw.Com