The Reserve Bank of India will announce its second bimonthly monetary policy statement for 2019-20 on Thursday amid expectations of a 25 basis points cut in the repo rate to support growth.
Repo rate is the key interest rate at which the central bank lends short-term funds to commercial banks. The repo rate currently stands at 6 per cent. The RBI had cut its repo rate by 25 basis points each in the last two bimonthly policies of February and April.
One basis point equals one hundredth of a percentage point. The Monetary Policy Committee chaired by Governor Shaktikanta Das began its bi-monthly monetary policy review on Tuesday.
Economy watchers and policy analysts say the likelihood of RBI cutting its repo rate has increased, as GDP growth slowed down to a 20-quarter low of 5.8 per cent in the January-March 2019 and retail inflation is well within the median 4 per cent mark.
The GDP growth had fallen in the quarter due to lacklustre growth in agriculture, manufacturing, construction, trade, hotels and power sectors which, in turn, pulled down the FY19 GDP growth rate to a five-year low of 6.8 per cent.
In the last monetary policy on April 4, the RBI governor had said that “with the inflation outlook looking benign and headline inflation expected to remain below target in the current year, it becomes necessary to address the challenges to the sustained growth of the Indian economy.”
Equity markets were cautious ahead of the MPC outcome with the BSE Sensex falling 0.46 per cent to 40,084 and NSE Nifty settling at 12,022, down 0.55 per cent. Stocks, bonds, currency and commodities markets were closed on Wednesday on account of Eid.
