India’s central bank cut its key interest rate by a quarter of a percentage point to 6% on Thursday, moving to prop up economic growth ahead of a national election next week.
The interest rate is what the federal bank charges on lending to commercial banks.
Lower interest rates help borrowers, though they can also spur inflation. The rate cut comes amid a deterioration in the outlook for regional and global growth.
In a bimonthly review of the economy released on Thursday, the Reserve Bank of India cut the retail inflation forecast to 2.9-3% for the first half of this fiscal year. It cited lower food and fuel prices and expectations for a normal rainy season.
In its February policy statement, the RBI had projected retail inflation at between 3.2-3.4%.
India’s financial year runs from April-March.
The Reserve Bank of India said in a statement that the economy, which is one of the fastest growing in the world, is facing headwinds, especially on the global front. It lowered its economic growth forecast for 2019-20 to 7.2% from the 7.4% it had estimated in February.
Growth fell to 6.6% in December quarter, the slowest in five quarters.
“The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish,” the central bank said.