"Moreover, the repo rate cut may compel banks to reduce the interest rates for FDs even further - this could result in even more people leaning towards housing as a better investment option", said Puri.
Vinod Nair, Head of Research at Geojit Financial Services, said the surprise rate cut shows RBI is sensing big issues in the future.
"MPC also made a decision to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target", the central bank's monetary policy statement read.
Niranjan Hiranandani, President, Assocham and NAREDCO, said: "There has been a total collapse in demand in both urban and rural India since March 2020".
"Going forward, we will continue to be vigilant and we will take whatever measures are necessary to meet the Covid-related challenges which are ahead of us", Das said.
"Domestic economic activity has been impacted severely by the two-month lockdown", he said and added that the top-six industrialised states that account for 60 per cent of India's industrial output are largely in red and orange zones.
COVID-19: India Crosses China's Tally, Over 85,000 Cases Reported
Maharashtra has also reported the highest number of deaths, 1068, followed by 606 in Gujarat and 239 in Madhya Pradesh . According to ministry officials, so far 27,920 people have been discharged from hospitals after showing improvement.
Speaking about the food inflation, the RBI governor said that the food inflation which had eased from the January peak in February and March has now surged to 8.6 per cent in April. Here, he said that price of vegetables, oilseeds, and milk emerged as pressure points.
MPC is of the view that headline inflation in first half of 2020 will be stay intact but by Q3 and Q4 it may fall below the target of 4 percent, said the RBI governor.
In its first official forecast for economic growth, the central bank has said the gross domestic product (GDP) is likely to contract in FY21 (April 2020 to March 2021). Assuming economic activity gets restored in a phased manner especially in the second half of this year, and taking into consideration favorable base effects, it is expected that the combination of fiscal, monetary and administrative measures being now undertaken both by the government and the RBI could create conditions for a gradual revival in activity in the second half of 2021.
"Home loan interest rates have already gone down substantially over the a year ago, and are presently at an all-time low averaging between 7.15% to 7.8%", he added.
The RBI extended the moratorium on payment of loans by another three months till August to provide much-needed relief to borrowers whose income has been hit due to the coronavirus crisis. The central bank set the 25 percent limit in June 2019 and capped lenders' exposure to a single party at 20 percent.
In a televised address, RBI Governor Shaktikanta Das said the global economy is heading into recession.
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