In the monetary policy review, RBI governor Mr. Raghuram Rajan has surprised everybody by announcing a repo rate hike of 25 basis points or 0.25%. New repo rate will be 8%. CRR has been kept the same.
This rate hike signals the RBI stance of planning to shift to CPI based inflation index instead of the present WPI index. RBI seems to have preferred low inflation to growth in this review. Mr. Rajan has stated that lower inflation will contribute to consumption and investment going forward.