The Reserve Bank of India (RBI) cut interest rates for the third time this year on Tuesday, providing a fresh shot in the arm for Asia's third largest economy.
The central bank lowered its key repo rate by 25 basis points to 7.25 percent after lowering it by the same amount in January and March.
The decision was in line with the expectations by majority of economists polled by Reuters. Of 48 economists, 35 expected the RBI to cut the repo lending rate by a quarter percentage point.
RBI Governor Raghuram Rajan said that monetary policy would continue to be data contingent, warning that a below normal monsoon, global crude prices and external sector risks pose a threat to inflation. The central bank projects inflation at around 6 percent by January 2016.
"Today's decision by the Reserve Bank of India (RBI) to cut the repo rate for the third time this year is unlikely to be the last in the current loosening cycle," Shilan Shah, India economist at Capital Economics, wrote in a note following the decision.
"But the RBI can't be complacent about meeting its medium-term inflation target. Given this, we are forecasting only one more 25bp cut in this cycle, which would bring the repo rate to 7.00 percent," he added.