New Delhi: The finance ministry welcomed the interest rate cuts announced by the Reserve Bank of India (RBI) Wednesday and said it was a vote of confidence on the steps taken by the government on fiscal consolidation and will lower the cost of loans for people at large.

“We have now moved from a hope-rally to a conviction-rally,” Minister of State for Finance Jayant Sinha told reporters here, adding the rate cut will provide the much-needed boost in the medium term to revive the economy.

“More rate cuts will depend on future data,” he said, hoping rating agencies take a cue.

“If you take all that’s happened in the last few days — the rail budget, the Union budget and the Economic Survey and now the RBI cut — all these suggest that the economy is on it’s way to maintaining a healthy momentum,” Sinha said.

“The outlook looks good because it is backed by data and reforms. The budget is hopefully going to push forward our growth. So if the outlook looks good, then the rating agencies should draw their lessons from that improving outlook.”

Getting some positive cues from the national budget tabled last week, and sensing an economic recovery, the RBI cut the repurchase (repo) rate to 7.5 percent from 7.75 percent, while the reverse repo rate was adjusted to 6.5 percent from 6.75 percent.

India Inc also welcomed the rate cut and said the unexpected move sends a huge, positive signal that the central bank and the government are working in tandem to push growth while not losing sight on the need to control inflation.

“The Reserve Bank has acted out of turn to respond to this urgency of the economy and industry. On behalf of CII, we thank and commend the RBI for this bold move”, said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII).

He hoped rating agencies will take a positive cue from the developments.

“This (rate cut) shows RBI’s comfort about the quality of fiscal consolidation. The decision comes post the signing of formal monetary policy framework between RBI and government giving positive signal for growth,” said R.K. Gupta, executive director, Bank of Maharashtra.