Inflation remains a major concern

It refers to "RBI sets the tone for India's economic ebullience". It is the first rate cut in nearly five years and it signifies a shift in monetary strategy. With this cut RBI has clearly sent a signal that it wants to boost lending, stimulate consumer demand and nurture investment. In recent months core inflation has shown easing out providing much needed headroom to the RBI to implement this rate cut. And slowdown in economic growth forced RBI to take the plunge now. By lowering the borrowing cost, the RBI wants to encourage businesses to expand and boost consumption and help economic growth. Now, banks will be happy to extend credit more freely, but they need to be wary of what they have witnessed with their microfinance and unsecured loan portfolios in recent months. Real estate sector, SMEs will take a sigh of relief and individual borrowers will see reduction in their EMIs and in turn more money in their pockets, coupled with recent Income tax cuts will create a positive environment for the consumption boom to take place. RBI will pray that while it did its best to spur economic growth, inflation should not spoil their game.

–Bal Govind, Noida