The sharp decline in growth had many analysts assuming the Reserve Bank will deliver a rate cut on Thursday.
The central bank also revised GDP growth downwards to 5 per cent for 2019-20 from 6.1 per cent projected in its October policy.
The economy is expanding well below the rate needed to generate enough jobs for the millions of young Indians.
This is the seventh consecutive cut in lending rates by the bank this fiscal.
A modest overshoot in recent inflation outruns is outweighed by downside risks to RBI's growth estimates.
Base rate has been kept unchanged at 9.50 per cent per annum.
The rate reduction is not applicable to the repo-linked loans.
Central Board of Trustees (CBT) had approved 8.65 per cent interest rate for the last fiscal in February this year.
At present, the EPFO is settling PF withdrawal claims at 8.55 per cent interest rate.
Floating rate loans are re-set as when the interest rates fall or rise, but fixed rate loans are reset in 9-12 months.