Chief Economic Advisor Arvind Subramanian on Tuesday welcomed the decision by the Reserve Bank of India to cut the repo rate by 25 basis points from 7.5 percent to 7.25 percent in the monetary policy review, opining that these cuts are consistent with trends in the economy.
"This is the third in a series of welcome rate cuts by the RBI. These cuts are consistent with trends in the economy, including strongly declining inflation, contained countertop deficits and ongoing strong fiscal discipline. The government and the RBI agree that these cuts signify that the economy needs policy support as economic growth is recovering while the external environment remains weak," Subramanian told the media.
"The government and the RBI will work together to ensure that the macro-economy remains strong while investment and growth are accelerated towards their potential," he added.
Earlier in the day, RBI Governor Raghuram Rajan said that low domestic capacity utilization, mixed indicators of recovery, and subdued investment and credit growth had warranted the Central bank to announce cut in the policy rate.
However, the RBI has as kept the Cash Reserve Ratio (CRR) unchanged at four percent.