### India's Central Bank Slashes Interest Rates for the Third Time to Bolster Growth

The Reserve Bank of India (RBI) has reduced interest rates by a significant half a percent, marking the third consecutive cut amid dwindling inflation and sluggish growth in the country's economy. This recent adjustment reduces the repo rate, the rate at which the RBI lends money to commercial banks, to 5.5%. This is the lowest level in three years and is expected to influence borrowing costs for home and car loans.

RBI Governor Sanjay Malhotra noted that India's economic growth is "lower than our aspirations" and emphasized the need to "stimulate domestic consumption and investment" due to increasing global uncertainties. The rate cut builds on prior reductions made in April and February.

Recent data showed that India's economy expanded by 6.5% in the fiscal year ending in March. Despite being the fastest-growing major economy globally, this growth rate is a notable decline from the 9.2% peak achieved in the 2023-24 financial year. Concurrently, retail inflation dropped to 3.16% in April, the lowest in six years and below the RBI’s target of 4%, primarily due to decreased food prices.

In response to these economic indicators, the central bank has revised its inflation forecast downward for the upcoming year. However, it has shifted its monetary policy stance from "accommodative" to "neutral," suggesting that future rate cuts will depend on the evolving dynamics between growth and inflation in India. Favorable factors such as a strong monsoon leading to fuller granaries, weakened commodity prices, particularly oil, and a robust currency are expected to keep inflation in check, allowing the RBI to maintain lower rates.

Reduced borrowing costs promise to boost economic growth by enhancing household purchasing power, lowering corporate input and debt servicing costs, and aiding government finance. This move is particularly beneficial for homebuyers and the struggling real estate sector. Anuj Puri, chairman of ANAROCK Group, highlighted that the lower borrowing costs make mortgage payments more affordable, potentially increasing demand in the real estate market, especially in the affordable and mid-income segments.

Following the announcement, Indian markets experienced a sharp rally, reflecting investor optimism in response to the central bank's latest monetary policy measures.