The Reserve Bank of India Wednesday announced a fourth consecutive rate cut in key policy rates, but this time by 35 basis points, to revive flagging growth.
The committee has cut repo rates by 25 basis points each in the previous three successive monetary policy meetings in February, April and June.
The repo rate now stands at 5.4 per cent.
With this, beginning February, the six-member monetary policy committee has cut key policy rates by a total of 1.1 percentage points. However, banks have passed on less than half of this in rate cuts to final borrowers leading to criticism over the effectiveness of monetary policy transmission.
The rate cut comes at a time when the economy is in the midst of a slowdown, and investment and consumption indicators are not showing any signs of revival.
The full-year growth for 2019-20 was also revised downwards to 6.9 per cent from 7 per cent projected in the June monetary policy.
Data from the Centre for Monitoring Indian Economy (CMIE) shows that capital expenditure in the economy on new projects has fallen for the second consecutive quarter in June to Rs 0.7 lakh crore. It was Rs 2.44 lakh crore as of March end and Rs 2.5 lakh crore as of December end.
Bank credit to industry is also growing at around only 6 per cent with micro, small and medium enterprises struggling to access credit.
Consumption has also slowed down sharply as reflected by the falling sales of automobiles and consumer durable items.