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Government welcomes RBI's 25 bp repo rate cut

NEW DELHI: The government has welcomed the Reserve Bank of India’s decision to cut rate and expects it to boost growth and market sentiment.

“We welcome the announcement by the RBI,” finance secretary Ashok Lavasa said after the central bank announced a 25 basis points reduction in repo rates, adding it is the first decision by the monetary policy committee. One basis point is one hundredth of a per cent.

“A very welcome move by the RBI. The positive and optimistic narrative by it will help boost investor confidence,” Niti Aayog vicechairman Arvind Panagariya tweeted. Economic affairs secretary Shakikanta Das tweeted, “Welcome rate cut by RBI. Expect banks to follow it up with effective transmission of rates. Rate cut net positive for economy.”

Das wrote on the microblogging site that the rate cut will “contribute to growth” and that it will “facilitate the move towards a low cost economy”.

The finance secretary said the decision “reflects a wide-ranging opinion, consultative process and I think is quite in keeping with general developments which are taking place in the economy”.

“This is a decision which will go down well with all sections of the economy,” Lavasa said after the policy announcement. In the run-up to policy review, the government had urged RBI to take note of the sharp fall in inflation to 5.05% in August.

There has been a feeling in the government that the central bank had ignored growth concerns while focusing excessively on inflation. Lavasa said RBI and the government are in sync on the issue of inflation. The government has given RBI a target of 4% consumer inflation till March 2021 with a 2% legroom on either side.
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