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AFTER REDUCTION IN REPO RATE THERE IS STILL A NEED FOR MORE MEASURES

Yesterday The Reserve Bank of India (RBI) reduced the repo rate by 25 basis points second time in the year. Now the governor also states that there is also a room for more rate cut by around 3 percentage points. According to him, our economy is sluggish and there is a need to improve domestic growth by spurring private investments in the economy. The government also welcomed RBI’s decision and agrees that it will improve the economy growth. The current rate cut will sustain country’s growth to 7.2 to 7.3 per cent in FY20. Now the repo rate which stands at 6.25 per cent earlier, now reached to 6 per cent but the cash reserve ratio, (the part of deposits of banks to be kept with RBI) were unchanged. The downward revisions in Consumer Price Index helped Monetary policy committee to support growth in the economy. Bond yields climbed to 14 basis points before closing at 7.35 per cent. The Sensex fell about half a percentage point along with rupee which fell to 1% today and reached to Rs 69.25 against U.S. dollar. The central bank eased up the interest rate due to thread of slowing economic growth. The estimate economic growth for FY20 could be lowered to 7.2 per cent as compared to the projection made in February policy to stood it at 7.4 per cent and the retail inflation assumed at 3.5 – 3.8 per cent in the second half. Though Consumer price index rose to 2.57% in February but it is still well below than RBI’s 4% target.