Economics

India Central Bank Gets `Mojo' Back as It Warns of Budget Risks

Bond yields decline on relief a neutral stance is maintained
Fiscal slippage could impinge on the inflation outlook: RBI

Shoppers and pedestrians walk past roadside stalls in Mumbai, India, on Friday, Dec. 15, 2017. India's inflation surged past the central bank's target, bolstering a view that interest rates may rise earlier than expected and offering little relief to battered bond markets.Photographer: Dhiraj Singh/Bloomberg

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By Anirban Nag and Archana Chaudhary

February 7, 2018 at 9:04 AM UTC

Updated on

February 8, 2018 at 1:02 AM UTC

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India’s monetary policy committee displayed its independent streak, flagging inflationary risks from an expansionary federal budget and shifting toward a more hawkish bent.

With the government increasing rural and farm sector spending to assuage angry voters, the central bank said worsening public finances could crowd out private investments and send borrowing costs higher. While it kept its overall stance neutral, one of the six-member committee gave up his rate cut call while another voted for a 25 basis-point increase.