India's reserve bank has lowered its benchmark repo rate, the rate at which it lends to commercial banks, by 25 basis points in a bid to jumpstart the country's economy.
The cash reserve ratio was unchanged.
"Growth has decelerated significantly, even as inflation remains at a level (that) is not conducive for sustained economic growth," the Reserve Bank of India said in a statement.
The rate-cut decision was widely expected by economists who have been calling for lower borrowing costs to help the economy, which grew at just 4.5 percent in the quarter to December, and came as India's minority government lost a coalition partner.
The DMK party's 18 MPs said they would not support the Congress party-led government following their failure to condemn alleged atrocities against Sri Lankan Tamils.
Five MPs who are ministers in the government announced they will also resign from the cabinet.
A senior minister said the government was "stable" and would remain in power.
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