India's central bank cut its main interest rates by a bigger than expected half percentage point today.
This was its first reduction in three years but it said there was limited scope for further easing.
The Reserve Bank of India said the benchmark repo rate, at which it lends to commercial banks, would fall to 8%.
The reverse repo rate, which it pays banks for deposits, would fall to 7%.
"The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate," the Reserve Bank of India governor Duvvuri Subbarao said.
India's central bank had hiked interest rates 13 times from March 2010, undertaking the most aggressive monetary policy tightening drive of all major economies. Rates have been on hold since December last year.
The bank's decision comes as India's inflation climbed unexpectedly in March, data showed yesterday, fuelled by rises in food and fuel prices.
Business leaders had been clamouring for interest rates to be reduced to boost the economy, which is expected by the government to grow 6.9% in the current year to March 31, its slowest pace since the 2008 global financial crisis.
