Today's hike is the second time in succession the RBI has hiked rates, after announcing a similar rate hike in Sept.
The Reserve Bank of India hiked the repo rate by 25 basis points, in a bid to curb inflation. In September, the WPI Inflation was a nasty surprise hitting 6.46%, as against expectations of 6%.
Though, this may already have an impact on growth, the RBI has made its intentions very clear to fight inflation.
"Inflation measured by the wholesale price index (WPI) rose in September for the fourth month in succession. The pass-through of rupee depreciation into prices of manufactured products is acting, along with elevated food and fuel inflation, to offset possible disinflationary effects of low growth. While food price pressures may ease with the arrival of the kharif harvest and the usual seasonal moderation, overall WPI inflation is expected to remain higher than current levels through most of the remaining part of the year," RBI governor Raghuram Rajan said.
"With the more recent upturn of inflation, and with inflation expectations remaining elevated anticipating the pass-through of exchange rate depreciation and ongoing adjustment in administered fuel prices, it is important to break the spiral of rising price pressures in order to curb the erosion of financial saving," the RBI has said in a release.