India's central bank cut its key interest rate by a quarter of a percentage point to 6% on Thursday, moving to prop up economic growth ahead of a national election next week.
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The interest rate is what the federal bank charges on lending to commercial banks.
Lower interest rates help borrowers, though they can also spur inflation. The rate cut comes amid a deterioration in the outlook for regional and global growth.
In a bimonthly review of the economy released on Thursday, the Reserve Bank of India cut the retail inflation forecast to 2.9-3% for the first half of this fiscal year. It cited lower food and fuel prices and expectations for a normal rainy season.
In its February policy statement, the RBI had projected retail inflation at between 3.2-3.4%.
India's financial year runs from April-March.
The Reserve Bank of India said in a statement that the economy, which is one of the fastest growing in the world, is facing headwinds, especially on the global front. It lowered its economic growth forecast for 2019-20 to 7.2% from the 7.4% it had estimated in February.
Growth fell to 6.6% in December quarter, the slowest in five quarters.
"The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish," the central bank said.