RBI steps in to prop up growth amid global uncertainties; promises enough liquidity

RBI has also taken into consideration the backdrop of a volatile global environment and policy divergence amongst global central banks

- Shanti Ekambaram

Amid growing global challenges to economic growth, including India, the monetary policy committee of the Reserve Bank of India (RBI) has unanimously voted for cutting the repo rate by 25 basis points to 6% with a change in the policy stance to 'accommodative' to sustain the economic momentum.

Going into the rationale for the cut, the headline inflation, now veering to the RBI's comfort zone of 4%, provides it with some leeway to protect the economy against the highly volatile external conditions. In February this year, the retail inflation had dipped to 3.61% as compared to 5.09% in the same period a year ago, due to a sharp fall in food inflation. At the moment, the outlook for major crops and staples remains positive.