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Modi government and central bank clash over interest rates

Indian monetary policy committee refused to meet finance ministry before decision

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Reserve Bank of India headquarters in Mumbai   © Reuters

MUMBAI -- Tensions are brewing between the government and the Reserve Bank of India after the monetary policy committee held key interest rates steady on Wednesday despite the administration's call for cuts.

Soon after the decision by the monetary policy committee, the Indian government's Chief Economic Adviser Arvind Subramanian expressed his disappointment over the decision to hold rates unchanged at 6.25%. He said a rate cut was needed as the economy was growing at the slowest rate in 2 years in a low-inflation environment.

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