Blame it on oil

The crude shock can turn into a nightmare for both the government and the RBI

In its February policy, announced a few days after the Union Budget, Indian central bank’s rate-setting body left the repo rate (the rate at which the Reserve Bank of India [RBI] infuses liquidity into the system) and the reverse repo rate (the rate at which it sucks liquidity out) unchanged at 4 per cent and 3.35 per cent, respectively. It also committed to continue with the accommodative stance “as long as necessary to revive and sustain growth on a durable basis”.

The RBI decoupled India’s monetary policy from that of the developed markets. While both the US Federal Reserve and Bank