The Monetary Policy Committee of the Indian central bank has unanimously decided to lower the interest rate by 25 basis points for the first time in nearly five years.

This is reported by Bloomberg.

Since December 2024, India has appointed a new head of the central bank, Sanjay Malhotra. Under his leadership, the regulator has opted to ease the country’s monetary policy. The last adjustment occurred in 2020.

This move was anticipated by most economists. Malhotra indicated that the less restrictive policy pertains only to this meeting and may not be implemented in the future.

The committee also decided to maintain a neutral monetary policy and focus on achieving inflation targets.

The central bank assured that it will remain flexible in providing liquidity, allowing banks more time to comply with the new liquidity coverage ratio.

Markets expressed disappointment over the unchanged monetary policy and the absence of new liquidity measures. The yield on 10-year bonds rose by 5 basis points to 6.71%. Stocks were volatile, with the NSE Nifty Index 50 dropping by 0.2%. The rupee strengthened against the dollar.

The central bank forecasts a slightly faster GDP growth and slower inflation in the financial year starting April 1.

Reminder:

India has eliminated import duties on certain components essential for mobile phone production, thereby encouraging local manufacturing.