Once upon an 8%

Conducting fiscal and monetary policies in what appears to be a phase of stagflation can be a huge challenge for any government. Even economic literature seems unclear on how you deal with a situation when growth dips sharply and the inflation rate remains stubbornly high. After dithering for nine months, the RBI finally decided to cut the repo rate (interest rate at which the central bank lends overnight to banks) as a signal that it was willing to recognise the risk to growth as a more dominant concern than the persisting problem of inflation.

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