The Reserve Bank of India is widely expected to cut interest rates for the first time in nearly five years. This is according to a Reuters survey of economists and analysts. Inflation in India has declined; however, it still remains above the RBI's medium-term target of four per cent.

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Still, the expected rate cut is to revive the flagging economy, which has seen growth hit a four-year low. This move will come under new governor Sanjay Malhotra's first monetary policy review on Friday.

After-tax relief, rate cuts in India soon?

The RBI's policy decision comes on the heels of the country's budget, which slashed tax rates to boost growth and spending. Analysts also cite the government's plan to tighten finances and deficit for the expected RBI move.

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Shilan Shah, deputy chief emerging markets economist at Capital Economics, told Reuters, "With the finance ministry still keeping the overall fiscal deficit in check, there is scope for the RBI to do more to boost the economy." He added, “This strengthens our conviction that the bank – under new leadership - will begin easing monetary policy...on Friday."

Inflation has stubbornly remained above the rbi's target for most of the last year despite the slowdown in growth. The rupee has also been weakening to repeated record lows despite the RBI selling dollars to stabilise the currency.

Still, some economists are worried about inflation and are pencilling in a no-change prediction for Friday. However, the RBI's recent moves show a rate cut is coming. The central bank announced a host of measures in late January which together would infuse 1.5 trillion rupees or 17.22 billion dollars into the banking system.

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However, investors are still hopeful for more steps, including another cash reserve ratio cut on Friday.

(With the inputs from the agencies)