Mumbai (AsiaNews / Agencies) - The Central Bank of India has cut the cash reserve ratio, with the aim of supporting the government's policies to boost growth. Duvvuri Subbarao, Governor of the Reserve Bank says that the cut from 4.5% to 4.25% will inject 175 billion rupees (2.5 billion euro) liquidity into the banking system. Instead to combat the tax burden interest rates remain unchanged. The intervention will be effective from 3 November.
Recently, the finance minister, Palaniappan Chidambaram, had asked the RBI to reduce their interest rates. However, Anubhuti Sahay, economist at Standard Chartered Plc in Mumbai, explains "the range of the Reserve Bank is very limited," and "it cuts rates only when it sees a drop in prices and more clarity from the government in its efforts towards fiscal consolidation. "
The government of Manmohan Singh has initiated a series of economic reforms, mainly aimed at encouraging investment and restoring the national currency. However, for 2013, analysts expect economic an growth of 5.8% compared to 6.5% this year. The decline is due to the reduction of investment and consumption, the decline in exports, poor crops because of a dry monsoon season, weaker than in previous years.