RBI cites global developments for reducing rates

The Reserve Bank of India (RBI) has cited global developments while announcing reduction in repo and the reverse repo rates by half a per cent today.

The central bank, in a detailed note explaining the new measures, has said since the third quarter review on January 27, the global financial and economic conditions have deteriorated further.

"The fourth quarter real GDP numbers of several advanced economies have turned out to be worse than expected. The uncertainty on global recovery has increased," the RBI statement said.

It said the US real GDP contracted sharply at an annualised rate of 6.2 per cent in the fourth quarter of 2008 while the unemployment rate there moved up to 7.6 per cent. The real GDP in the euro area also declined by 1.5 per cent in the fourth quarter of 2008.

Reflecting deteriorating global demand, Japanese exports fell by 45.7 per cent in January and the Japanese economy, the world's second largest, contracted sharply by 3.3 per cent in the fourth quarter of 2008.

RBI pointed out that by way of response, the governments all over the world continue to unveil expansionary fiscal policies.