India's central bank cut interest rates for the first time in nearly 5 years. The measure came amid growing concerns about slowing growth in the world's fifth-largest economy, AFP reports. 

The Central Bank of India (CBI) said the benchmark repo rate - the level at which it lends to commercial banks - would be cut by 25 basis points to 6.25 percent.

While major central banks around the world cut interest rates last year, and some continue to do so, stubborn inflation has prevented India's from following suit. 

The country's retail inflation has fallen recently, hitting a four-month low of 5.22% in December, but still remains above the central bank's medium-term target of 4%.

The easing of price pressures now seems to provide an opportunity to focus on boosting growth.  

In the September quarter, India's economy expanded much more slowly than expected due to sluggish manufacturing and weak urban consumption. 

It is projected to expand at its slowest pace since the Covid-19 pandemic this fiscal year, after growing more than 8% last year.

In his first monetary policy review, CBI Governor Sanjay Malhotra said the Monetary Policy Committee's decision to cut interest rates was unanimous.

Malhotra adopted a softer approach than his predecessor Shaktikanta Das, who raised rates by 2.5 percentage points between May 2022 and February 2023 to fight inflation.

The bank cut them for the last time in May 2020.

The CBI's decision comes less than a week after the government unveiled sweeping income tax cuts in its annual budget, seeking to put more money into the hands of consumers who are being hit by high food prices and weak wage growth.

India's economy grew 5.4 percent in the September quarter, the worst result in seven quarters and below analysts' expectations of 6.5 percent.

While the readings still put India among the world's fastest-growing major economies, they indicate a slowdown in the breakneck pace of growth seen through most of 2023 and 2024 | BGNES