What They Said: India's Interest Rate Cut The Reserve Bank of India has cut the "repo rate," or the rate that it lends money to commercial banks, by 50 basis points to 8 percent, the first rate cut in three years. The Reserve Bank left the "reserve repo rate" and "cash reserve ratio," or amount of cash banks must keep on hand, unchanged at 7 percent and 4.75 percent, respectively. A lowered repo rate may signal a decrease in interest rates for consumer loans, and is generally considered a sign that Reserve Bank officials believe the economy needs bolstering. Officials had hiked rates numerous times recently in an attempt to curb inflation. The Sensex gained 222 points in late morning trading after the Reserve Bank's announcement. This gain was moderated by the afternoon and the Sensex was up 92 points as of 1:40 p.m. Coal India, Oil and Natural Gas Company and real estate giant DLF showed the biggest gains, while automotive companies like Tata Motors and Mahindra & Mahindra as well as Reliance Industries had the biggest losses. Here's what the experts thought: C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister: The RBI has taken a good decision. It is being pulled by two sets of opposing factors - slowing growth and increasing inflation. But the redeeming factor is that non-food manufacturing inflation has dropped significantly, which helped RBI take this decision. However, it is important to note that a further reduction in policy rates are not automatic. Industry as a whole will be helped, particularly the housing sector and will provide a fillip to growth. N. Jayakumar, MD, Prime Securities: RBI has relayed a positive surprise. First it cut the cash reserve ratio by 75 basis points in January and now with 50 bps cut in the repo rate. The RBI has several sets of eyes on growth and does not function under pressure from the government. RBI is not known for histrionics. Devendra Kumar Pant, Director, Fitch Ratings: Although the headline inflation is slightly high at 7 percent, the core inflation had fallen below 5 percent, which aids the argument to lower interest rates. The question was whether to wait until inflation was down to the RBI's target of 4 percent or take a decision based on forward looking statistics. The RBI has achieved its target of compressing demand to a certain extent and has taken this step to revive the economy. The 50 basis point reduction came as a surprise as the markets were expecting a 25 base points cut at the most. This will be beneficial to interest sensitive sectors like automotive and real estate. Sajjid Chinoy, India economist, JP Morgan: "I am skeptical of transmission from policy to market cuts," which means bank loans are unlikely to become cheaper. I don't expect more cuts from the RBI. We don't need bold steps from RBI but from Delhi, in terms of easing supply bottlenecks. Monetary policy should not be responsible for doing what policymakers in Delhi are supposed to do. RBI doesn't need to take on the mantle of all that Delhi doesn't do," Mr. Chinoy said. ASSOCHAM: Industry chamber ASSOCHAM hailed the RBI's move to cut repo rate by 50 basis points and said reversing the tight monetary policy will give a push to economic growth. "This has set the stage for cheaper lending costs and created an investment climate which could even possibly reverse inflationary pressures," said secretary general D.S. Rawat. High interest rates have been discouraging fresh investments and industrial production for nearly two years now. The RBI has acted vigorously to reverse the slowdown, Mr. Rawat said.