The ReserveBank of India (RBI) on Friday cut its benchmark interest rates for the fifthtime this year. The RBI monetary policy committee announced a 25 basis pointscut in its policy rates in an effort to boost a sluggish economy as inflationremains in a comfortable zone.
According toa mint survey of bankers, RBI is expected to reduce policy rates by 25 basispoints, while a minority expected a 40 basis points cut.
The committeesaid that it would maintain an accommodative stance as long as it is necessaryto revive growth while ensuring that inflation remains within the target. This leavesroom for more rate cuts in future.
The centralbank's panel has also reduced its growth forecast for the current fiscal from6.9% to 6.1% earlier. The committee observed that risks to growth had emergeddue to weak domestic demand and sagging export prospects on account ofcontinuing trade tensions. The panel has, however, retained its consumer priceinflation forecast for the second half of the financial year and pegged it at3.5 %-3.7%.
India, whichis the third largest economy of Asia, grew by just 5% in the June quarter inthe slowest pace since 2013.
According toreports, inflation in August accelerated to a 10-month high but remained wellbelow the central bank's medium-term target of 4% for a 13thstraight month. Retail inflation inched up to 3.21% in August.
The governmenthas also mandated RBI to ensure that inflation remains below 4%, with adeviation of 2% on either side.