BBC News reports that India’s central bank lowered its policy repo rate by 25 basis points to 7.5% after making a similar cut in mid-January. The repo rate is the level at which the central bank lends to commercial banks.
Simon Atkinson, editor India Business Report says “…with India’s push to “Make in India”, another cut is welcome news for manufacturers. To me, this looks like a vote of confidence from the central bank, perhaps especially the way the finance minister gave himself an extra year to hit the 3% budget deficit target – specifically to allow more infrastructure spending on the roads, bridges and other projects so badly-needed.
Dr. Raghuram Rajan, the central bank governor, said softer inflation and the government’s commitment to fiscal discipline were factors behind the easing measure. “Softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6% in the second half,” he said in a statement on Wednesday, March 4, 2015. India’s inflation has eased sharply due to falling oil prices from last year and rose to an annual 5.11% in January – well below the central bank’s 6% target.
