An appropriate call

Significant fiscal slippage could affect monetary policy

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) on Friday reduced the policy repo rate by 25 basis points (bps), largely in line with expectations, though some participants were looking forward to a bigger cut. The MPC has done well by not going overboard with a deeper cut to address the economic slowdown. The central bank also reduced the projected growth in gross domestic product (GDP) for the current fiscal year to 6.1 per cent from the previous forecast of 6.9 per cent. 

It could be argued that a sharp downward revision in the growth forecast warranted