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Policymakers aiming to support cyclical rebound

The past month has shown that India's authorities are still leaning towards policy loosening to support a cyclical rebound in economic growth, despite the strength of the revised GDP data. For a start, although the Finance Ministry is still aiming to rein in the fiscal deficit as a share of GDP, plans outlined in the FY15/16 budget show a slower pace of fiscal consolidation over the next three years than had previously been the case. Soon after the budget announcement, Governor Rajan of the Reserve Bank of India (RBI) cut interest rates in an unscheduled meeting for the second time this year, stating that there was evidence beyond the GDP data to show that the economy remains weak. 

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