India gets an interest rate cut for the first time in nearly five years.

Live from the BBC World Service, this is the Marketplace Morning Report.

I'm Luke Wilson in Fuliana Byrne. Good morning.

The Reserve Bank of India has reduced its main interest rate by 25 basis points this morning,

from 6.5% to 6.5%. percent. It's the first cut since May 2020 and is aimed at boosting growth in Asia's third biggest economy. I've got the BBC's Archina Shukler with me. Hi, Archner. Hi, Luke. What's behind this rate cut?

This rate cut was widely anticipated and the biggest reason driving this is the slowing growth in the Indian economy. Remember, India's staring at its weakest growth in four years. Last two years, the Reserve Bank of India kept the interest rates at high levels. They were squarely focusing on containing inflation. And India's fast-paced growth

post the pandemic actually gave the central bank that breathing room. But now the consumption is

slowing down, especially in urban India. We've seen corporate profits shrink. Investment growth

is not coming in, especially from the corporate side. And inflation too, which has been the large focus area for the RBI,

that although is still above its target, it's slowly easing to a comfort zone.

This rate cut is also coming post the budget that gave income tax relief to the middle class

to push spending.

So the entire focus right now is on pushing consumption-led growth in the

Indian economy. And the current state of the Indian economy, what does that look like for people in

India? How has it been felt on the ground? Well, you know, over the last two, three years,

we saw that especially the urban Indians were consuming a lot, and that was driving fast-paced growth in India, which literally was world-beating growth records.

But over time, stagnant wages and consistently high prices have actually curtailed the spending power of Indians.

And add to that high

interest rates kept them away from taking loans. So we've actually seen people's, you know,

deposits go down. We've seen loans, fresh loans, growth coming down for the banks as well.

Now that the rate cut cycle has begun, it could push for more purchases,

mortgage costs would be less, credit cut interest rates could come down,

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