The Governor of the Reserve Bank of India, Shaktikanta Das, has announced a reduction in the cash reserve ratio (CRR) in order to increase liquidity for investors.

This decision comes as the country is facing a decline in gross domestic product (GDP) growth and inflation that is higher than the mandated range of 2-6 percent.

The choice to reduce the CRR instead of implementing a more significant rate cut reflects a cautious approach due to ongoing inflationary pressures.

Analysts believe that a repo rate cut would have been problematic given the current inflation situation, which has been a key focus for the Monetary Policy Committee (MPC) in its commitment to targeting inflation.

The aim of this strategic liquidity injection is to create a more favorable environment for investors, enabling them to view market conditions optimistically despite the existing economic challenges.