For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

5 reasons why RBI cut repo (interest) rates

|
5 reasons why RBI cut repo (interest) rates
The Reserve Bank of India, which met today to review its monetary policy, cut repo rates (rates at which it lends money to banks) by 0.25 per cent. Here's why India's central bank cut the rates.
 

1) Falling inflation

Wholesale price inflation for March came in at 5.96 per cent, the lowest in the last three years. In the past, inflation has been the prime reason why RBI did not cut rates aggressively. With inflation falling, RBI decided to cut rates.

2) Low growth rates

Economic growth rates in India have fallen and the GDP has come in at just 4.5 per cent for the quarter ended Dec 31, 2012. This is the lowest growth rates seen in a decade. A cut in interest rates will spur investment and help growth.

3) Crude oil prices are falling

Crude oil forms the largest component of our imports. Falling crude prices would help reduce are imported inflation. Brent crude has now fallen from $118 a barrel to $100 a barrel.

4) Falling gold prices

Gold have reduced from their pean levels in 2011. Reduced import of gold through a drop in prices would ensure lesser pressure on the current account deficit and hence on the Indian rupee. A strong Indian rupee would reduce our import bill.

5) Reviving the investment cycle

Higher interest rates are a deterrent for fresh investment from corporates. A drop in interest rates would help push the investment cycle and hence growth rates in the economy. The RBI may have been prompted to drop rates to push the investment cycle.

GoodReturns.in

Read more about: rbi
Story first published: Friday, May 3, 2013, 11:21 [IST]
Company Search
Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more