Welcoming the Reserve Bank's decision to cut policy rates, Finance Minister Nirmala Sitharaman on Wednesday said that the Indian economy would require support from both the central bank and the ministry to maintain growth in the face of global uncertainties induced by the US tariff hikes.
Addressing a press meet at the London Stock Exchange with UK Chancellor Rachel Reeves soon after the India-UK Economic and Financial Dialogue, Sitharaman expressed confidence in the underlying strengths of the Indian economy based on domestic demand amid the ongoing global markets turmoil unleashed by US trade tariffs.
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"On the Reserve Bank's announcement of a rate cut, I welcome it, really, with the sense of joy, because growth is of great importance,” Sitharaman told PTI, when asked about the 25 basis point cut in the repo rate – the level at which the central bank lends to commercial banks, therefore influencing borrowing costs.
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The Reserve Bank on Wednesday reduced key interest rates for a second consecutive time and signalled more easing to come as it sought to bolster the economy that is facing further pressure from damaging US tariffs.
The Monetary Policy Committee (MPC), consisting of three central bank members and an equal number of external members, voted unanimously to cut the repurchase or repo rate by 25 basis points to 6%.
“We are in a situation where because of global uncertainties we will need every support, both from the central bank and from the ministry. The ministry has been keeping pace with certain policy decisions and also in the Budget, several announcements have been made to invigorate growth and now, therefore coming to this decision (rate cut) is absolutely welcome,” Sitharaman said.
Asked about the long-term impact of US tariffs imposed on Indian imports, the minister said that the Indian government was studying the duties and also pursuing an “ambitious trade agreement” from which both the US and India can benefit.
“US tariffs are something that we have technically been studying. It has got to be in the context of the continuing negotiations with the US for signing the agreement at the earliest,' the minister said.
'So that is one side, and the other is that the US is the largest trading partner for India. But even with that said, India's economy is largely driven by domestic demand and consumption. It is that domestic demand, with a bulging middle class which has the purchasing power, we think the economic revival and revival leaning towards a sustained growth is possible,' she said.
'Our focus will be on ensuring that domestic demand is kept up, so that the underlying strength of the Indian economy is maintained,' she added.
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