The Reserve Bank of India (RBI) has lowered its policy repurchase rate by 25 basis points to 5.15%. This was expected. What was not expected was the slashing of its economic growth forecast for this fiscal year. By its revised projection, it sees India’s economy growing by just 6.1%, down from 6.9% earlier. India’s stock markets were quick to convey their dismay. The benchmark BSE Sensex, which was up about 200 points before RBI’s declaration, reversed those gains and slipped by roughly as many points after the policy announcement.

It’s undeniable that RBI is alive to the slump that the economy is in, and has drawn on its monetary-policy firepower to do what it can to ease credit conditions. However, it may not help much. The transmission of rate cuts remains stubbornly sticky. Before this move, RBI had lowered its policy interest rate by a cumulative 110 basis points during the course of 2019, but banks have cut their lending rates by a mere 29 basis points for loan customers.

It’s also not just about transmission. Now that consumer demand has dropped sharply in several sectors, credit demand for business investment has also weakened. Cheaper loans do not necessarily mean that more commercial activity will take place. Many companies are still deeply indebted. The shadow banking sector is still experiencing convulsions caused by a series of shocks. Credit flows appear to have suffered something of a seizure in high-offtake markets such as real estate. The government has given the economy a fiscal boost in the form of reduced corporate taxation, but without a demand revival, the usual policy tools may not be able to achieve much.

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