In the recent quarterly review, RBI cut the repo rated by 50 bps. Many of the pundits are saying that this is not a right a move at this juncture. After this cut, we have already seen the volatility in the exchange rate.
As the interest rates have been reduced, the exchange rate may begin the slide due to slowing inflows and the great demand for the dollar to repay overseas loans and imports. It may also lead to rise in current account deficit which may go past 4% of GDP