The Reserve Bank of India’s April 8 decision to cut the policy rate by 25 basis points, shift to an accommodative stance, and ease liquidity conditions was expected. What was not known—until now—was the rationale behind these moves. The minutes of the Monetary Policy Committee meeting show that while inflation has stabilised, the central concern was a deteriorating growth outlook.Governor Sanjay Malhotra noted that while rural and urban consumption trends remain stable, the combination of a 20-basis point downward revision in growth and exposure to external trade shocks warrants a pre-emptive policy response. The policy actions, he said, were taken to “nurture domestic demand impulses” and address the downside risks to growth.
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