How do you interpret the Reserve Bank of India (RBI)’s recent move?
The decision to leave interest rates unchanged and to cut only the cash reserve ratio by 25 basis points reflects RBI’s concern on persistent inflationary pressures, even against a background of moderating domestic demand growth. We continue to believe the Indian economy faces difficult supply-side conditions. If these persist, ultimately, the economy’s potential growth would be reduced. Needless to say, we continue to anticipate the government would pursue further measures in respect to its ‘reform and development’ drive, as it recognises building the economy’s productive capacity is the best form of stimulus that can be delivered......
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