Summary RBI governor Raghuram Rajan has insisted his priority is bringing inflation under control.
MUMBAI (AFP) - India s central bank cut interest rates by 25 basis points on Thursday, the first since 2013, in a surprise announcement ahead of next month s policy meeting
The Reserve Bank of India (RBI) reduced the benchmark repo rate -- the level at which it lends to commercial banks -- to 7.75 percent following a drop in inflation, which has come on the back of a plunge on global oil prices and a slip in domestic food costs.
"These developments have provided headroom for a shift in the monetary policy stance," the bank said in a statement.
The RBI has been under pressure from government and business leaders to reduce rates to increase lending and help kickstart the economy, which has been struggling through the worst slowdown since the 1980s.
But RBI governor Raghuram Rajan has insisted his priority is bringing inflation under control, although expectations had been high for a cut at the February 3 meeting.
Inflation, especially high food prices, have caused much hardship for India s 1.2 billion population, of which nearly a quarter live in severe poverty, according to the World Bank.
