India views the recent US Federal Reserve rate cut as a positive development for the Indian economy and believes it is unlikely to cause volatility in the financial markets. The government considers the 0.5% rate cut by the US Federal Reserve to be moderate rather than aggressive.

Speaking to CNBC-TV18, Economic Affairs Secretary Ajay Seth stated, “The Federal Reserve has done what it assesses is good for the US economy. I see it as a positive for the global economy, including the Indian economy.”

When asked whether the magnitude of the rate cut was too aggressive, Seth said it was not the case. He elaborated on why the US rate cut would not lead to financial market volatility or affect Foreign Portfolio Investment (FPI) inflows into India, saying, “It is a mere 50 basis-point cut from a high level, so I don’t see that making any significant impact on the flows. We have to see how things develop going forward.”

The government also believes that India’s Monetary Policy Committee, under the Reserve Bank, will decide the timing and magnitude of domestic rate cuts at an appropriate time. “My sense is their decision is based on what is good for the Indian economy. We should not read too much into the event that happened yesterday,” Ajay Seth explained

Also read: How does RBI react to Fed interest rates — a look at recent history