Second, the rate cut was a response to softening inflation. Lower inflation will improve the competitiveness of our exports. Third, the rate cut was effected during a phase of easing commodity prices – particularly of oil – which will reduce the pressure on the CAD.
Finally, empirical evidence  BIS central bankers’ speeches  7  shows that in emerging economies such as India, import demand is less a function of lower interest rate than of increased income. In other words, the marginal propensity to import by borrowing money is small. 57.