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RBI cuts interest rates as economy slows, India loses out to China as fastest growing economy

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7 years ago

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RBI cuts interest rates as economy slows, India loses out to China as fastest growing economy

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, on Thursday unanimously lowered key lending rate or repo rate by 25 basis points or 0.25 per cent to 5.75 per cent amid dismal gross domestic product (GDP) growth, subdued investment and slowdown in consumption space.

The six-member MPC also changed the policy stance to “accommodative” from “neutral”.

Repo rate is the interest rate at which commercial banks borrow short-term funds from the RBI. Thursday’s decision comes after conclusion of a three-day meeting of the MPC. This was the third time in a row that the RBI lowered the key interest bringing it to a level last seen in September 2010.

The reverse repo rate and bank rate have been adjusted at 5.50 and 6.0 per cent respectively. The bank also lowered the Gross Domestic Product (GDP) growth forecast for 2019-20 to 7 per cent from 7.2 per cent in earlier projection.

Inflation projection has been raised to 3-3.1 per cent for April-September and 3.4-3.7 per cent or the second half of the year.

RBI has decided to do away with charges levied on RTGS and NEFT transactions, banks will be required to pass this benefit to their customers.

As and when the banks decide to pass on the rate cut, consumers could see home, auto and other loans getting cheaper. For retail consumers, a cut in rates could have a two-pronged impact. For depositors, new deposits will earn a lower rate and thereby lower returns. For borrowers, though, a downward movement of interest rate would bring down the interest outgo in the near future. For floating rate home loans, however, a new rate becomes effective on the reset date of the loan.

The cut in interest rate was on expected lines. Two-thirds of 66 economists in a poll conducted by news agency Reuters ahead of the release of GDP data had expected MPC to announce a 25-basis-points cut in the repo rate to 5.75 per cent.

The rate cut comes after official data last month showed the country’s GDP or gross domestic product grew 5.8 per cent in the quarter ended March 31. That meant India lost its status as the fastest growing major economy to China, which clocked a growth of 6.4 per cent in the three-month period.

The RBI has lowered its GDP target for financial year 2019-20 to 7 per cent from 7.2 per cent. The consumer inflation for the first half of financial year 2019-20 has been pegged in range of 3-3.1 per cent with risks evenly balanced, RBI noted in the policy statement.

In February, the committee had cut repo rate by 25 basis points from 6.50 per cent to 6.25 per cent. The MPC had then shifted its stance to ‘neutral’ from ‘calibrated tightening’.

Then, in its first meeting in FY’20, the MPC on April 4 had cut the key lending rate by 25 basis points from 6.25 per cent to 6 per cent. Reverse repo rate had been adjusted to 5.75 per cent and the committee had kept the monetary policy stance at ‘neutral’. The RBI had projected a GDP growth of 7.2 per cent for 2019-20, a revision from its February view of 7.4 per cent. It had also said that the consumer inflation was 2.57 per cent in February.

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Economy news

ITR filing last date today: What taxpayers must know about penalties and delays

The deadline for ITR filing ends today, September 15. Missing it may lead to penalties, interest charges, refund delays, and loss of tax benefits.

Published

3 months ago

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September 15, 2025

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Income Tax Return

The deadline to file Income Tax Returns (ITR) for most taxpayers, including salaried individuals, pensioners, and small businesses not requiring audit, ends today, September 15. Those who miss the due date face penalties, interest charges, and loss of certain tax benefits.

Penalties for late filing

If the return is not filed by the deadline, taxpayers can still file a belated return until December 31. However, under Section 234F of the Income Tax Act, late filing attracts penalties.

  • For income up to Rs5 lakh: penalty is capped at Rs1,000.
  • For income above Rs5 lakh: penalty increases to Rs5,000.

Additionally, if any tax remains unpaid, Section 234A imposes an interest of 1% per month (or part thereof) until the return is filed.

Consequences of missing deadline

  • Loss of certain tax benefits: Belated filers cannot carry forward specific losses such as business or capital losses.
  • Restrictions on tax regime change: Taxpayers lose the option to switch between old and new tax regimes after the deadline.
  • Refund delays: Those eligible for refunds will face delays compared to timely filers.

Steps to file before time runs out

  • Gather documents: Form 16, Form 26AS, Annual Information Statement (AIS), bank interest certificates, and proofs of investments or deductions.
  • Use the e-filing portal: File immediately to avoid last-minute portal congestion.
  • Verify your return: Ensure the ITR is verified electronically or physically for it to be considered valid.

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Economy news

India’s GDP surges 7.8% in Q1, outpaces estimates and China

India’s GDP surged 7.8% in Q1 2025-26, the highest in five quarters, driven by strong services and agriculture sector growth, according to NSO data.

Published

3 months ago

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August 29, 2025

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GDP Growth

India’s economy recorded a sharp growth of 7.8% in the April-June quarter (Q1) of 2025-26, surpassing the earlier estimate of 6.5% and outpacing China’s 5.2% growth in the same period. The figure also marks a notable rise from the 6.5% growth in the corresponding quarter last year, making it the fastest expansion in the last five quarters.

Strong performance across key sectors

According to data released by the National Statistical Office (NSO), the surge was driven primarily by the services sector, which expanded 9.3% compared to 6.8% a year ago, and the agriculture sector, which rose 3.7% against 1.5% last year.

The construction sector, however, witnessed a slowdown, growing 7.6% compared to 10.1% in the same quarter of the previous fiscal.

RBI’s earlier forecast

Earlier this month, the Reserve Bank of India (RBI) had projected a more modest Q1 growth of 6.5%, with overall real GDP growth for 2025-26 expected at 6.5%. RBI Governor Sanjay Malhotra attributed the positive outlook to favorable conditions, including a good monsoon, lower inflation, and strong government capital expenditure.

He said, “The above normal southwest monsoon, lower inflation, rising capacity utilisation and congenial financial conditions continue to support domestic economic activity. The supportive monetary, regulatory and fiscal policies, including robust government capital expenditure, should also boost demand. The services sector is expected to remain buoyant, with sustained growth in construction and trade in the coming months.”

India remains fastest-growing major economy

With China reporting 5.2% growth in April-June, India has retained its position as the world’s fastest-growing major economy. The latest figures highlight resilience in the face of external pressures, including recent US tariffs on Indian imports.

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Sensex falls 600 points, nifty slips 180 as US tariffs hit Indian markets

Indian equity markets witnessed sharp declines as US tariffs on Indian imports took effect. Sensex dropped over 600 points, while Nifty fell nearly 180 points in early trade.

Published

3 months ago

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August 28, 2025

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Stock market crash

Indian stock markets opened lower on Thursday, reeling under the pressure of fresh US tariffs imposed on Indian goods.

At 9:17 am, the BSE Sensex dropped over 600 points to trade at 80,315, while the Nifty 50 declined nearly 180 points to 24,583. This comes a day after Washington enforced an additional 25% duty on Indian imports, raising the total tariff to 50%.

Broad-based sell-off across sectors

Market sentiment remained weak with 14 of the 16 major sectors posting losses. Small-cap and mid-cap indices also dipped, losing 0.2% and 0.1%, respectively.

The fall follows a steep correction earlier this week. On Tuesday, before the tariff announcement, both Nifty and Sensex fell by around 1% — their sharpest single-day decline in three months. Domestic markets remained closed on Wednesday for a local holiday.

Analysts warn of near-term pressure

According to market experts, Indian equities are likely to witness further volatility as investors digest the impact of the US action. The tariffs were imposed in retaliation for India’s continued crude oil imports from Russia, a move that has escalated trade tensions between the two nations.

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