India has slashed interest rates and unveiled its second economic
stimulus package in less than a month, in a bid to boost growth and
stave off the effects of the global economic crisis.
The new
stimulus plan eases limits on foreign investment in certain Indian
companies, including real estate and infrastructure. It also allows
state governments to borrow up to $6 billion to fund
infrastructure projects.
To free up credit, India's central bank
Friday cut its cash reserve ratio by half a percentage point, to five
percent. That is the amount of cash banks must keep in reserve, and
officials say the cut should inject $4.1 billion into
the domestic banking system.
The central bank also cut two key interest rates by one percentage point.
It
dropped the repurchase rate - the rate at which it makes short-term
loans to commercial banks - to 2.5 percent, and the
reverse repurchase rate - the rate at which it borrows from commercial
banks - to four percent.
It is India's fourth interest rate cut since October.
National
planning official Montek Singh Ahluwalia told reporters he hopes the
Indian economy will grow by seven percent this year.
Some information for this report was provided by AFP, AP and Bloomberg.
