The Reserve Bank of India (RBI) has raised repo
and reverse repo rates by 25 bps to 8.5% on Tuesday to arrest the Country's rising
inflation. However, the bank kept cash reserve ratio (CRR) unchanged at 6%.
This is the 13th rate rise since March 2010 by the Reserve Bank of India, even
though the bank battles to keep India's growth story intact amid weakening
global environment.
Inflation, which has been the major reason behind the RBI aggressive stance,
has remained above 9 percent for 10 straight months. Food inflation climbed to
10.60% for the week ending October 8 from the same period a year earlier,
according to government data.
The Wholesale Price Index (WPI), India's most closely watched inflation gauge,
stayed well above the RBI's comfort zone at more than 9% in September.
The RBI's rate hikes have helped to some extent in the moderation of inflation,
but the inflation rate is still in an uncomfortable zone going by the RBI's
mandated range for inflation.
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