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Reserve Bank of India reduces key interest rate

The country’s central bank lowers full-year growth forecast.

The Reserve Bank of India (RBI) has reduced its key interest rate to 7.75 per cent from 8 per cent for the first time in nine months to spur economic growth.

India’s central bank also reduced the amount of money that banks need to keep in reserve. The move is expected to provide 180bn Indian rupees of extra cash for them to lend.

Although, India’s economy grew by 5.3 per cent in the July to September quarter from a year earlier, but consumer price growth has slowed in the recent times. In December 2012, the country’s wholesale price index declined to an 11-month low of 7.18 per cent.

Anticipating further slowdown in inflation in the near future, the RBI, in a statement, said that the slowdown in the rate of inflation “provides space, albeit limited, for monetary policy to give greater emphasis to growth risks”.

As well as fall in domestic demand, Indian exports and manufacturing sector were affected due to the slowdown in the global economy. Moreover, delay in economic reforms made foreign investors cautious of entering the country.

For the fiscal year 2012-13, RBI has lowered its full-year growth forecast to 5.5 per cent from its earlier forecast of 5.8 per cent.

Sujan Hajra, chief economist at Anand Rathi Securities in Mumbai, told the BBC: “The Reserve Bank of India is definitely less hawkish in its statement, and we think it will remain in the easing mode in 2013.”

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Labour tensions boil over at fractious MPs' meeting

Corbyn supporters and critics clash over fiscal charter U-turn and new group Momentum. 

"A total fucking shambles". That was the verdict of the usually emollient Ben Bradshaw as he left tonight's Parliamentary Labour Party meeting. His words were echoed by MPs from all wings of the party. "I've never seen anything like it," one shadow minister told me. In commitee room 14 of the House of Commons, tensions within the party - over the U-turn on George Osborne's fiscal charter and new Corbynite group Momentum - erupted. 

After a short speech by Jeremy Corbyn, shadow chancellor John McDonnell sought to explain his decision to oppose Osborne's fiscal charter (having supported it just two weeks ago). He cited the change in global economic conditions and the refusal to allow Labour to table an amendment. McDonnell also vowed to assist colleagues in Scotland in challenging the SNP anti-austerity claims. But MPs were left unimpressed. "I don't think I've ever heard a weaker round of applause at the PLP than the one John McDonnell just got," one told me. MPs believe that McDonnell's U-turn was due to his failure to realise that the fiscal charter mandated an absolute budget surplus (leaving no room to borrow to invest), rather than merely a current budget surplus. "A huge joke" was how a furious John Mann described it. He and others were outraged by the lack of consultation over the move. "At 1:45pm he [McDonnell] said he was considering our position and would consult with the PLP and the shadow cabinet," one MP told me. "Then he announces it before 6pm PLP and tomorow's shadow cabinet." 

When former shadow cabinet minister Mary Creagh asked Corbyn about the new group Momentum, which some fear could be used as a vehicle to deselect critical MPs (receiving what was described as a weak response), Richard Burgon, one of the body's directors, offered a lengthy defence and was, one MP said, "just humiliated". He added: "It looked at one point like they weren't even going to let him finish. As the fractious exchanges were overheard by journalists outside, Emily Thornberry appealed to colleagues to stop texting hacks and keep their voices down (within earshot of all). 

After a calmer conference than most expected, tonight's meeting was evidence of how great the tensions within Labour remain. Veteran MPs described it as the worst PLP gathering for 30 years. The fear for all MPs is that they have the potential to get even worse. 

George Eaton is political editor of the New Statesman.