Mumbai: India's central bank unexpectedly cut its benchmark short-term interest rates Thursday morning by a quarter percent as steeply falling prices for oil and other commodities have helped bring inflation under control and allowed the bank to focus more on allowing faster economic growth.
Raghuram G. Rajan, the central bank's chief, had strongly hinted in an interview on Wednesday that the next move would be to cut interest rates, but gave no indication that he would act before the bank's next regularly scheduled review on Feb. 3.
The steep fall in world oil prices since the bank's last interest rate review on Dec. 2 has been a big benefit for India, which relies almost entirely on imports for its oil and had been spending roughly $100 billion a year before oil prices plummeted. But Rajan remained cautious, saying that "the oil prices will impact us, but we have to make a judgment how long that will last."
Industrialists and some of their allies in the government of Prime Minister Narendra Modi have been pressing for lower interest rates, even as Modi and his top allies, notably the finance minister, Arun Jaitley, have continued to back Rajan. In Wednesday's interview, in a meeting room atop the Reserve Bank's headquarters overlooking Mumbai's financial district, Rajan said several times that he was not being pressed by New Delhi to change course.
"I don't feel pressure - I feel I'm doing what is needed, and the government trusts me with that responsibility," he said.
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