India's central bank, the Reserve Bank of India has announced a reduction in the cash reserve ratio (CRR) by 75 basis points on Friday to boost the slowing economic growth in the country by improving liquidity.

The reduction is larger than expected as the market analysts believed that the central bank might reduce the CRR by 50 bps. The 75 bps cut would increase the liquidity by Rs 48,000 in the country's economy. The additional funds in the economy would help the economy in the coming motnsh as the liquidity position is expected to become tighter in mid-March due to advance tax outflows.

The RBI governor D Subbarao has already indicated that the central bank is considering a reversal of the monetary policy as the inflation is falling and the high interest rates have affected economic growth in the country. The fall in inflation is due to a good kharif harvest as well as a high base. The fall comes as a relief to the government and the central bank.

Finance Minister Pranab Mukherjee has said that he is satisfied with the fall in food items and believes that if the trend continues, the overall inflation will be under control allowing authorities to increase interest rates and boost economic growth, which has shown signs of a slowdown in recent months.