As India's economy continues to stumble, the country's central bank has tried to balance things out by reducing key lending rates. The Reserve Bank of India announced on Wednesday that it will be cutting interest rates once again to support the country's economy.
The latest interest rate cut will be the fourth time this year, bringing the country's key lending rates to its lowest level in over nine years.
India's central bank reasoned that the latest round of interest rate cuts was necessary to boost economic growth and private investments within the country.
The current governor of the Reserve Bank of India, Shaktikanta Das, led the move to cut India's interest rates, which he has been able to do so in the four meetings he has held since he took over the position in December of last year.
The Reserve Bank of India officially reduced interest rates for the loans it grants to other banks to 5.4 percent. The last time the country's interest rates were that low was back in April 2010. Unfortunately, it seems like interest rates will be dropped even lower as reports indicate yet another possible rate cut by October of this year.
Das' appointment as the governor of India's central bank and his recent actions has invited some criticism, particularly over how the bank will be able to successfully reign in price pressures under his leadership. Some analysts have criticized the bank's move to cut interest rates, calling it a big "misstep."
However, Das does have the support of the government, which continues to stand by its belief that significant rate cuts would ultimately be beneficial for the country's economy.
This year, India's economy is at its weakest in over four years. The growth of the country's gross domestic product (GDP) had dropped from 6.6 percent to 5.8 percent for the first quarter of 2019. The economy has been struggling to recover from the recent credit crunch that was mainly caused by a slowdown in spending after the country's general election and problems caused by consumer finance providers.
Apart from the credit crunch, the country has also been feeling the effects of the global economic slowdown, which had been exacerbated by the ongoing trade dispute between China and the United States. As the country's monetary policy turns more supportive, consumers are now being more cautious with their spending activities.
With widespread unemployment and weak growth in wages, consumers are now choosing to save instead of spending their money. Economic experts have pointed out that the slowed spending has caused the country's growth engine to significantly slow down.
