Skip to content 
Search

Latest Stories

India’s interest rates cut to six-year low

INDIA’S central bank cut interest rates to a six-year low of 6.25 percent October 4, citing a good monsoon, in its first monetary policy decision under new governor Urjit Patel.

The Reserve Bank of India said the benchmark repo rate – the level at which it lends to commercial banks – would be brought down by 25 basis points from 6.50 percent.


The rate was last at 6.25 percent in November 2010.

The decision was expected to please Narendra Modi’s government who had become frustrated at the pace with which Patel’s predecessor, Raghuram Rajan, had reduced rates during his three-year tenure.

“The outlook for agricultural activity has brightened considerably,” the RBI said in a statement, adding that 85 percent of the country had received “normal to excess precipitation” during India’s four-month-long monsoon.

Good monsoon rains are vital for Indian crops and a particularly dry season can reduce farm output, raising food prices which can be crippling for the tens of millions of India’s poor.

The above average rains have brought relief to millions of rural farmers who were reeling from two years of drought, helping to push inflation down to a five-year low in August.

Lower interest rates boost consumer spending which can cause an uptick in inflation.

Rajan, who stepped down last month, made controlling inflation a priority. Despite cutting rates four times, he came under government pressure to make deeper cuts to help stimulate spending.

The latest interest rate decision was the first to be made by a new Indian monetary policy committee, which was established last month, rather than the chief of the central bank.

Previously the governor would decide whether to cut rates. Now they are set by a six-member committee, including Patel, two RBI executives, and three independent economists appointed by the government.

Patel enjoys a deciding vote in the event of a tie, but cannot veto or overrule the committee. The panel is similar to a committee in Britain that sets rates for the Bank of England.

All six members of the monetary policy committee voted in favour of cutting rates to 6.25 percent, said the RBI statement.

“Today’s decision implies a slight dovish bias among the new MPC, which contrasts with the more hawkish approach of the previous governor,” said Shilan Shah of Capital Economics.

“This suggests that we could see further modest, loosening over the coming months. But the scope for aggressive rate cuts is limited,” the economist added in an emailed statement.

Modi has made economic growth a priority since taking power in 2014 and India has been the world’s fastest-growing major economy having outpaced Asian rival China for more than a year.

However, growth slowed sharply to 7.1 percent year-on-year in the first quarter of the 2016-17 financial year, down from 7.9 percent recorded in the preceding quarter.

The central bank tipped growth to pick up again as it retained its 7.6 per cent projection for the financial year, adding that it also expected to meet its target of limiting inflation to 5 percent by March 2017.

“The momentum of growth is expected to quicken with a normal monsoon raising agricultural growth and rural demand,” the statement read.

The Bombay Stock Exchange closed up 0.32, or, 91.26 points, at 28,334.55 following the announcement.

More For You

UK business district
The Canary Wharf business district including global financial institutions in London.
Getty Images

Bond yields ease following Starmer’s support for Reeves

THE COST of UK government borrowing fell on Thursday, partially reversing the rise seen after Chancellor Rachel Reeves became emotional during Prime Minister’s Questions.

The yield on 10-year government bonds dropped to 4.55 per cent, down from 4.61 per cent the previous day. The pound also recovered slightly to $1.3668 (around £1.00), though it did not regain all its earlier losses.

Keep ReadingShow less
modi-trump-getty
Modi shakes hands with Trump before a meeting at Hyderabad House in New Delhi on February 25, 2020. (Photo: Getty Images)
Getty Images

Indian exporters watch closely as Trump says trade deal with India likely

THE US could reach a trade deal with India that would help American companies compete more easily in the Indian market and reduce tariff rates, President Donald Trump said on Tuesday. However, he cast doubt on a similar deal with Japan.

Speaking to reporters on Air Force One, Trump said he believed India was ready to lower trade barriers, potentially paving the way for an agreement that would avoid the 26 per cent tariff rate he had announced on April 2 and paused until July 9.

Keep ReadingShow less
Kolhapuri sandal sales surge in India post Prada controversy

Customers shop for 'Kolhapuri' sandals, an Indian ethnic footwear, at a store in New Delhi, India, June 27, 2025. REUTERS/Adnan Abidi

Kolhapuri sandal sales surge in India post Prada controversy

INDIAN footwear sellers and artisans are tapping into nationalist pride stoked by the Prada 'sandal scandal' in a bid to boost sales of ethnic slippers with history dating back to the 12th century, raising hopes of reviving a struggling craft.

Sales are surging over the past week for the 'Kolhapuri' sandals that have garnered global attention after Prada sparked a controversy by showcasing similar designs in Milan, without initially crediting the footwear's origins.

Keep ReadingShow less
UK business district
The Canary Wharf business district including global financial institutions in London.
Getty Images

Economy grew 0.7 per cent in Q1 2025, fastest in a year

THE UK economy expanded at its fastest pace in a year during the first quarter of 2025, driven by a rise in home purchases ahead of a tax deadline and higher manufacturing output before the introduction of new US import tariffs.

Gross domestic product rose by 0.7 per cent in the January-to-March period, the Office for National Statistics (ONS) said, confirming its earlier estimate. This was the strongest quarterly growth since the first quarter of 2024.

Keep ReadingShow less
modi-trump-getty
Trump shakes hands with Modi during a joint press conference at Hyderabad House in New Delhi on February 25, 2020. (Photo: Getty Images)
Getty Images

Key issues in India, US trade talks

TRADE talks between India and the US have hit a roadblock over disagreements on duties for auto components, steel and farm goods, Indian government sources said to Reuters, dashing hopes of reaching an interim deal ahead of president Donald Trump's July 9 deadline to impose reciprocal tariffs.

Here are the key issues at play:

Keep ReadingShow less