Reserve Bank Governor Raghuram Rajan on Wednesday announced a surprise repo rate cut, his second in less than two months. Repo rate has been reduced by 25 basis points or 0.25 per cent to 7.5 per cent with immediate effect.
The repo rate cut comes days after Finance Minister Arun Jaitley's Union Budget announcement. In his Budget, Mr Jaitley had loosened the reins on public spending to drive growth, but promised lower-than-expected borrowing despite raising the fiscal deficit target.
Mr Jaitley's balancing act seems to have gone down well with Dr Rajan. In a statement, he said, "The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative."
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