The Reserve Bank of India (RBI) governor, Urjit Patel, while announcing his first monetary policy after taking the charge from Raghuram Rajan, has cut the repo rate by 26 bps, making it 6.25% from 6.5% making it low of last six-years.

The decision has been taken by the newly made six-member Monetary Policy Committee (MPC), making the difference as the decision was so far taken by the RBI governor alone.

The RBI in a statement said, “The committee expects that the strong improvement in sowing, along with supply management measures, will improve the food inflation outlook. The government has announced several measures to cool food inflation pressures, especially with regard to pulses.”

Liking the move the markets raised as Sensex increased 100 points and Nifty trading firm above 8,750, reports said.

Expecting momentum on the economic growth, the statement said, “To quicken with a normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to the urban consumption spending from the pay commission's award.”

Shubada Rao, chief economists at Yes Bank has been quoted by a news channel as saying, “This was along expected lines. That dominant pressure on headline inflation, mainly food, has begun to ease rapidly, which paved way for the 25 bps rate cut today.”

By Prajakt K