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Markets are jumping the gun on RBI rate hikes

Financial markets appear increasingly convinced that the RBI is on the cusp of monetary tightening, perhaps due to fears of a re-run of the Taper Tantrum in 2013. But India isn’t as vulnerable to a sudden drop in capital flows as it was back then and, with the output gap likely to remain significant even as the economy recovers, the RBI is unlikely to consider tightening any time soon.

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