RBI slashes key interest rates, CRR to boost investment, spending

The latest fillip to interest rates sends the proper signals to the market and the benefits of lower interest rates could be passed on to both industry as well as consumers, they said.

Taking into account the latest measures, they added, the central bank has injected so far over Rs.320,000 crore ($66 billion) into the system to ease credit freeze and boost economic growth.

India's economy grew at a robust annual rate of 9 percent or more for the past three years but global financial groups like Citigroup, JP Morgan, Goldman Sachs, Morgan Stanley and Nomura have, in recent months, lowered their estimates for India's GDP growth for the current fiscal year ending March 2009 to 6.5-7.5 percent.

India's exports contracted 9.9 percent in November from a year earlier, the second consecutive fall after a 12.1 percent dip in October and a key manufacturing index contracted sharply in December, indicating the slowdown was spreading.

The apex bank's move comes close on the heels of inflation cooling down in India. According to the latest government data, India's annualized inflation rate had come down from a high of 12.91 percent in August last year to 6.38 percent as on December 20.

The move also follows rate cuts implemented by central banks from the US to South Korea to stem global economic slowdown.