A timely cut

Late last July, the Reserve Bank of India (RBI) shocked markets with a 50 basis points (bps) increase in its ‘repo' or lending rate, as against the earlier baby-step hikes of 25 bps. On Tuesday, it sprang a pleasant surprise by doing just the opposite: Slashing its key policy rate by 50 bps (from 8.5 to 8 per cent), when nobody really expected more than a 25 bps cut, with diehard monetarists warning even against that. So, what has changed?

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