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RBI is justified in holding back on repo rate

The Reserve Bank of India (RBI) has painted the picture of an economy where inflation is rising – retail inflation has gone up by around 2 percentage points since the Monetary Policy Committee’s last meeting – while growth is decelerating and is expected to slow down further. The combination of these two factors justify the RBI’s decision to hold back reduction in the repurchase rate – the rate at which the central bank infuses liquidity in the banking system – in the fourth bi-monthly monetary policy review on Wednesday. The RBI has slashed its estimate of the full year (2017-18)