RBI Lowers Growth Forecast: No Relief For Common Man Yet

The Reserve Bank of India on Friday kept its key interest rate unchanged citing inflation risks, but cut the Cash Reserve Ratio that banks are required to park with the central bank, boosting money with lenders to support a slowing economy. Experts have said the Reserve Bank's credit policy was on expected lines, and the reduction in the cash reserve ratio (CRR) would help support growth, after the sharp downward revision in the forecast for the current financial year. Simply said, CRR is the percentage of a bank's total deposits that it is required to maintain in liquid cash with the RBI as a reserve. RBI Governor Shaktikanta Das flagged the persistent food inflation in his explanation for the majority decision. Governor Das also noted that high-frequency indicators suggest the slowdown in domestic activity has likely bottomed out, with recovery driven by festive demand and increased rural activity. Does the decision reflect a cautious approach to persistently high food prices and slowing economic growth? Will this move help ease out the liquidity situation supporting credit and overall growth and how?