RBI steps up to the plate

On the face of it, it may seem odd that RBI chose to hike policy rates by 25 bps after staying on hold at the December review. For, since then, headline CPI and WPI inflation have moderated 130 bps, food prices continue to correct, the anticipated industrial rebound at the end of 2013 did not materialise, and the government appears determined to stick to its budgeted fiscal deficit target, which will be a further drag on growth in the current quarter. 

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