India: Slow growth calls for fifth cut in a row from RBI – Nordea

Nordea Markets analysts note that the Reserve Bank of India (RBI) delivered its fifth rate cut in a row today with the stance has been linked to reviving growth, as the growth forecast was revised down markedly.

Key Quotes

“The move today was expected, and the repo rate now stands at 5.15%, the lowest in almost 10 years. The decision for a cut was unanimous across all six members, and it was decided to keep an “accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target”. There were some expectations for a bigger cut following the unconventional 35 bps last time, but governor Das argued in the press conference that the 25 bps should be seen as an addition to the 110 bps that were already delivered this year and judged it as appropriate at this point.”

“Slowing growth prospects remain the top priority of the central bank, as real GDP growth slid to a six-year low of 5% y/y in the June quarter.”

“In a spontaneous attempt to lift growth and spur business, the government announced a dramatic corporate tax cut on September 20th. This measure was welcomed by markets with widespread optimism, sending stocks up by its strongest two-day rise in a decade.”