India’s central bank unexpectedly cut interest rates for the fifth time since October after the economy grew last quarter at the slowest pace since 2003. The Reserve Bank of India reduced the repurchase rate to 5 percent from a record low of 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent, according to a statement on its Web site today. Governor Duvvuri Subbarao is driving policy rates down from record lows to revive investment and spur consumption in Asia’s third-largest economy. The $1.2 trillion economy is slowing as exports decline and access to funds for companies from overseas and the stock market is cut off by the global recession. “We see a significant slowdown in investment,” said Sailesh Jha, a senior regional economist at Barclays Capital Plc in Singapore. “There is scope for more significant rate cuts.” Subbarao has room to slash rates because falling commodity prices have slowed inflation to a 14-month low of 3.36 percent from a 16-year peak of 12.91 percent in August. “It is expected that the reduction in the policy interest rates will further encourage banks to provide credit for productive purposes at viable interest rates,” the central bank said in its statement. “The Reserve Bank on its part would continue to maintain ample liquidity in the system.” India’s economy expanded 5.3 percent in the three months to Dec. 31 from a year earlier after a 7.6 percent gain in the previous quarter, the statistics agency said last week. That was less than the 6.1 percent expected by economists. To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net.

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