Government capex boom, RBI to dial up hawkishness

All eyes will be on the RBI's policy decision on Thursday, which has become less of a formality given the surge in food prices. We still think that the central bank will keep the repo rate on hold at 6.50%, but the hawkish rhetoric will be dialed up. Meanwhile, the latest fiscal data suggest that, so far at least, the government is delivering on its promise to significantly ramp up capital expenditure this year.

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