......The RBI governor, Duvvuri Subbarao, remains in an unenviable position as he tries to devise polices to support the rupee while also facing the ongoing monetary policy dilemma. On the one hand, the dismal industrial production reading means that he will continue to face pressure from businesses to cut interest rates further. He appeared to succumb to such lobbying in April, when the central bank reduced the repo rate by 50 basis points to 8%. On the other hand, when considering the RBI’s determination not to undermine its credentials as a monetary institution unwilling to tolerate excessive price instability, it would be difficult to justify further monetary loosening when inflation is still so high......
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