The Reserve Bank of India (RBI) yet again lowered the interest rates for the third time, citing weakness in Asia's third-largest economy. The central bank slashed its key interest rate by 25 basis points (bps) to 7.25%, in line with the market expectations, repeating the interest rate cuts of 25 bps each in January and March.
The move came on the back of a flurry of disappointing data, which suggests softness in many corners of the economy. This is primarily thanks to weak investment, lower credit growth, feeble corporate revenue growth, soft corporate profits, rising bad loans and declining exports. Added to the woes is the latest consumer sentiment data, as measured by the MNI India Consumer Sentiment Indicator, which fell drastically to 119.6 in May from 122.1 in April suggesting fading confidence in the economy.
While this is true, the Indian economy is also on the verge of a recovery after the pro-growth government took office in last May.