Indian Government is taking necessary steps even as it emerges that the 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.
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 is said to have lowered India’s growth rate in the last quarter to 5.8 percent, with unemployment at its highest since the 1970s.
Indian car manufacturers among them 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 uphill task to create employment opportunities for over 1.2 million Indians who join the labour market monthly.
