RBI: Better to be cautious than concerned

To us, the important emphasis was on external stability, which the RBI has clearly placed a lot of importance on

Even after some easing of inflation risks, the Reserve Bank of India's monetary policy committee (MPC) voted unanimously to increase the repo rate by 50 bps, taking the key policy rate to 5.40 per cent. The MPC took a calibrated and measured view, staying with its message of “withdrawal of accommodation,” and reiterating its commitment to bring inflation within target while supporting growth.

Viewed purely through a macroeconomic lens, the decision was perhaps unexciting since economic projections were left unchanged. Still, we sense that there is a large amount of caution built into the projections, especially on inflation. The Governor