Tuesday, India's central bank lowered its repo rate and the reverse repo rate by 25 basis points to 4.75% and 3.25% respectively with immediate effect. At the same time, the central bank maintained its cash reserve ratio, or CRR, at 5% and the bank rate at 6%.
The Reserve Bank of India lowered its growth estimate for 2008-09 to 6.5% to 6.7% and forecast the real GDP growth of around 6% for 2009-10. The central bank said any upturn in the growth momentum is unlikely in view of the projected contraction in global demand during 2009, particularly decline in trade.
The wholesale price index inflation is projected at around 4% by end-March 2010. The central bank said the WPI inflation, however, is expected to be in the negative territory in the early part of 2009-10. However, this should not be interpreted as deflation for policy purposes, the bank added.
In a statement accompanying the monetary policy decision, the central bank said major macroeconomic challenge at this juncture is to support the drivers of aggregate demand to enable the economy to return to its high growth path.
Further, the central bank said managing the large government borrowing programme in 2009-10 in a non-disruptive manner is a major challenge.
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