India’s central bank makes fourth 2019 rate cut as growth slows

Unemployment is a significant concern, with 1.2 million Indians joining the labour market each month.

Amid a lack of jobs, many Indians turn to entrepreneurship [File: Krishna N Das/Reuters]
Amid a lack of jobs, many Indians turn to entrepreneurship [File: Krishna N Das/Reuters]

India’s central bank has cut interest rates for the fourth time this year, as New Dehli battles sluggish economic growth and high unemployment.

The Reserve Bank of India (RBI) said on Wednesday that the benchmark repo rate – the level at which it lends to commercial banks – would be reduced by 35 basis points to 5.40 percent, taking rates to their lowest level since 2010.

“The monetary policy committee was of the view that a 25 basis point rate cut was inadequate due to evolving global economic conditions while a 50 basis point cut would be excessive,” RBI Governor Shaktikanta Das told reporters.

“Hence, 35 basis points was viewed as a balanced level of cut due to the current circumstances.”

In a recent survey of economists by Bloomberg News, all 36 respondents had predicted that the central bank would cut rates by 25 basis points.


A fall in domestic demand lowered India’s growth rate in the last quarter to 5.8 percent, with unemployment at its highest since the 1970s.

Indian carmakers including Mahindra & Mahindra have halted production and reported falling sales as consumer demand fell throughout the first months of 2019.

“Domestic economic activity continues to be weak, with the global slowdown and escalating trade tensions posing downside risks,” the central bank added in a statement released on Wednesday. 

The RBI revised down its growth projection for 2019-20 from 7.0 percent to 6.9 percent, noting that the global economy has been losing pace.

Prime Minister Narendra Modi, who won a landslide victory in recent national elections, faces an enormous challenge to create enough jobs for the 1.2 million Indians who join the labour market each month.

Source : AFP

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