India’s central bank cuts rates to near decade lows to revive growth

India, Asia’s third-largest economy, expanded by just 5 percent in the June quarter, its slowest pace since 2013. (AP)
Updated 04 October 2019

India’s central bank cuts rates to near decade lows to revive growth

  • Central bank to maintain its ‘accommodative’ policy stance ‘as long as it is necessary’ to revive growth
  • Asia’s third-largest economy expanded by just 5 percent in the June quarter, its slowest pace since 2013

MUMBAI: The Reserve Bank of India on Friday cut the key policy rate to its lowest levels in nearly a decade, stepping up its efforts to kickstart an economy growing at its slowest pace in six years.
The central bank, which also sharply trimmed its 2019-20 growth forecast, said that it will maintain its “accommodative” policy stance “as long as it is necessary” to revive growth, and ensure inflation remains within target.
The six-member Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 5.15 percent, for a fifth straight meeting this year and in line with expectations in a Reuters poll. The reverse repo rate was reduced to 4.9 percent.
And markets expect further easing after Friday’s reduction, with the RBI seen delivering another 15-basis point cut at its December policy, before an extended pause, according to a Reuters poll conducted before the policy review.
With the protracted Sino-US trade war raising the risk of a global recession, central banks around the world — including the US Federal Reserve and the European Central Bank — have ramped up monetary support in recent months.
India’s cumulative rate cuts totaling 135 bps make it the most aggressive central bank in Asia. The RBI’s repo rate is now at its lowest levels since March 2010, when it stood at 5 percent, following the global financial crisis.
“In our opinion, RBI as a central bank has done more than enough to stabilize economic settings. From here onward, monetary easing may not achieve much incrementally,” said Rupa Rege-Nitsure, chief economist of L&T Finance Holdings.
She said it is now the government’s task to remove structural constraints in the economy, with the RBI supporting this effort by fostering financial stability.
All six MPC members voted in favor of a rate cut and for retaining the accommodative stance, the statement said.
Markets wobbled after the RBI decision.
The broader NSE Index, which was up 0.60 percent before the policy decision, turned negative after the rate cut and was last trading down 0.62 percent. The 10-year benchmark bond yield rose to 6.63 percent from 6.59 percent before the announcement, while the rupee weakened slightly to 70.97 per dollar.
“While the recent measures announced by the government are likely to help strengthen private consumption and spur private investment activity, the continuing slowdown warrants intensified efforts to restore the growth momentum,” the MPC, said in its statement.
To revive the faltering economy, the government in September announced a steep cut in the corporate tax rate — to 22 percent from 30 percent — triggering the biggest intraday gain in Indian stocks in more than a decade.
Asia’s third-largest economy expanded by just 5 percent in the June quarter, its slowest pace since 2013, on the back of low consumer demand and a slowdown in government spending amid global trade frictions.
Surveys this week also showed the nation’s manufacturing and services sectors under increasing strain, underlining the difficulties facing businesses.
The weak GDP numbers prompted several economists to lower their growth projections. The RBI also cut its real GDP growth forecast for 2019-20 to 6.1 percent from a prior projection of 6.9 percent.
The RBI in its Monetary Policy Report (MPR) said it expects real GDP growth to recover in the back half of 2019-20 due to a favorable base effect and past monetary policy actions.
Inflation in August accelerated to a 10-month high but remained well below the central bank’s medium-term target of 4 percent for a 13th straight month. The RBI said it expects inflation to stay under this target through to the early months of fiscal 2020-21.
The central bank said that policy “transmission has remained staggered and incomplete.” It noted that the weighted average lending rate on fresh loans has fallen by just 29 bps, versus the 110 bps cut, ahead of today’s announcement.
Economists expect policy transmission to improve after the RBI mandated banks to link fresh loans to an external benchmark like the repo rate, or the rate on short-term treasury bills since the start of October.
“The RBI is likely to continue with its campaign for more rapid transmission of the benefits to credit users,” said K. Joseph Thomas, research head at Emkay Wealth Management.

Jubilant cheers as Dubai begins one-year countdown to Expo 2020

Updated 19 sec ago

Jubilant cheers as Dubai begins one-year countdown to Expo 2020

  • Dubai prepares for eye-catching countdown on Burj Khalifa
  • Live performances from singer Mariah Carey and acclaimed Emirati singer and Expo 2020 ambassador Hussain Al-Jassmi

DUBAI: Crowds gathered at different locations in the UAE on Sunday night to mark its one-year countdown to Expo 2020 in October next year, with host emirates Dubai staging a spectacular concert, topped by a light projection on the iconic Burj Khalifa.

American superstar Mariah Carey was the star of the night, which also saw performances from regional artists including Khalifa, Shamma Hamdan, Abri and Funk Radius, Showcase and Jaysus Zain. The audience also grooved to a few Arabic tunes from Emirati singer Hussain Al-Jassmi.

A make-shift stage was set up at the Burj Park in Dubai’s downtown area to host the performances, while people also enjoyed a good view of the tallest building in the world. The countdown was facilitated by Emirati social media sensation Khalid Al-Ameri and Bollywood actress Shraddah Kapoor. 

A 3-minute firework display lit up the skies of Dubai as the crowd eagerly waited for Carey to appear on stage.

The 49-year-old singer sang her all-time favorite songs, including “Emotion,” “We Belong Together,” and a revival of the Motown classic “I’ll Be There,” to an enthusiastic audience who didn’t mind the heat and humidity at the outdoor venue.

The other six emirates also marked the occasion with free-for-all activities in venues such as the Louvre Abu Dhabi, Al Majaz Waterfront in Sharjah, Ajman Museum, Umm Al Quwain Corniche, Al Qawasim Corniche in Ras Al Khaimah and Fujairah Fort.

The events, Minister of State for International Cooperation and Expo 2020 Director-General Reem Al-Hashimy said, will “offer a window into the once-in-a-lifetime celebration that awaits from October 20, 2020.”

“The next 12 months will see us put the finishing touches to ensure an exceptional World Expo,” she added, in a report by state-run WAM.

The Louvre Abu Dhabi featured YouTube sensation Sandra Sahi, as well as singers Stephon Lemar, Layla Kardan, the Emirati Trio.

Indian band ROOH, singer and pianist Clarita de Quiroz, Egyptian oud player Rami Zaki and other regional artists were celebrating the count down at Sharjah’s Al Marjaz waterfront.

While the Ajman Museum hosted Arabic fusion band, pop-rock musician Hydyy, Emirati soul singer Chakram, poet Storm Fernandes, artist Humaira Hussain and MC Mohammed Enaba.

The 6-month Expo 2020, to be held at a vast new site in the south of Dubai, will officially open on Oct. 20 next year, with organizers expecting an estimate of 25 million visitors.