The policy rate cut for a third time this year by the powerful Monetary Policy Committee under the leadership of RBI Governor Shaktikanta Das has won praise from industrialist Anand Mahindra - along with a compliment on the significance of the word "Shakti" or power.
The six-member MPC led by the Reserve Bank of India Governor today cut the policy rate by 25 basis points to 5.75 per cent - the lowest since July 2010 - mainly to boost private consumption and improve investment activity. One basis point is one hundredth of a percentage point.
"We need all the right moves now to get the flywheel of the economy moving faster. I'm glad we have an RBI Governor with the word 'Shakti' within his name..." Anand Mahindra tweeted today in what was seen as an appreciation of the RBI Governor's bold decision to bring down policy rate to its lowest level in nine years.
The RBI has also waived fees for NEFT and RTGS transactions and told banks to pass on the benefit to consumers.
All six of the MPC members voted for a 25 basis points cut, and for the policy stance to be changed to "accommodative" from "neutral". "A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," the MPC said in a statement.
The Chairman of the Mahindra Group's reference to the "flywheel" - an important automobile part - comes at a time when passenger vehicle sales in India dropped 17 per cent in April in their worst monthly fall in nearly eight years as weak sentiment, high insurance costs and a liquidity crunch dented car sales.
Sales of passenger vehicles dived to 247,541 in April versus 298,504 a year earlier, data released by the Society of Indian Automobile Manufacturers showed, according to news agency Reuters.
The latest policy rate cut is forecast to improve private consumption and may lift the automobile market again.