The Reserve Bank of India on Thursday cut the repo rate by another 25 basis points to 6 per cent.
The move will cheer markets and investors and is the second consecutive rate cut by the RBI. It has also maintained the policy stance neutral and lowered the retail inflation and GDP forecasts.
The six-member committee voted 4:2 for the decision. Pami Dua, Ravindra H. Dholakia, Michael Debabrata Patra and Shaktikanta Das voted in favour of the decision while Chetan Ghate and Viral V. Acharya voted to keep the policy rate unchanged.
Read the first bi-monthly monetary policy statement here
Forecasts
It expects CPI inflation at 2.4 per cent in January to March and 3.5 per cent to 3.8 per cent in the second half of the fiscal. It has forecast GDP growth between 6.8 per cent and 7.1 per cent in the first half of the fiscal and at 7.3 per cent to 7.4 per cent in the second half.
The decisions were taken as part of the first bi-monthly Monetary Policy Committee meeting of 2019-20. The MPC is headed by RBI Governor Shaktikanta Das.
With inflation concerns easing, the RBI in its last policy revision on February 7 cut the repo rate by 25 basis points to 6.25 per cent and changed the monetary policy stance from calibrated tightening to neutral.
It had projected GDP growth for 2019-20 at 7.4 per cent – in the range of 7.2-7.4 per cent in the first half, and 7.5 per cent in the third quarter and estimated retail inflation at between 3.2 per cent and 3.4 per cent for the first half of the fiscal.
Also read: MPC has reasons to reduce policy rate again
Markets reaction
The benchmark indices extended their losses at mid-session after the RBI cut the benchmark repo rate by 0.25 percentage points. The Sensex was trading at 38,772, down 105 points on its previous close. The Nifty was quoting at 11,616, down 27 points or 0.24 per cent lower. Read the live market updates here