The Reserve Bank of India on Thursday in a surprise move lowered interest rates and shifted its stance to "neutral" from "calibrated tightening" to boost a slowing economy after a sharp fall in the inflation rate.
The monetary policy committee (MPC) cut the repo rate by 25 basis points to 6.25 percent, as predicted by only 21 of 65 analysts polled by Reuters. Most polled respondents had expected the central bank to only change the stance, to neutral.
Four of six members of the MPC voted to cut the rates, while all six members voted for a change in the stance.
SHASHANK MENDIRATTA, ECONOMIST, IBM, NEW DELHI
"The central bank's commentary on inflation and growth support a dovish outlook for the policy.
"On growth, the RBI once again highlighted downside risks to its forecast of 7.4 percent. We concur with that assessment. Trade related uncertainties due to U.S.-China trade tensions are likely to weigh on India's growth as well. The central bank also acknowledged presence of negative output gap due to tepid private investment and easing in private consumption."
"We think the impact of budget measures on growth are likely to materialise with a lag which should provide the RBI with space for rate cuts."
"There is a possibility of another rate cut by the central bank in April. The macro backdrop as such supports the RBI's stance and does not raise questions over its independence."
RUPA REGE NITSURE, CHIEF ECONOMIST, L&T FINANCIAL SERVICES, MUMBAI
"Based on the evolving dynamics of inflation, demand and growth, this is the perfect policy response in the current circumstances. Aligning NBFCs' (non-banking financial companies') risk weights to cost of bank borrowings will go a long way in correcting the distortions.
"By duly incorporating financial stability considerations in its monetary policy response, the RBI has done a great job in boosting the market sentiment."