The Reserve Bank increased the repo rate by another 25 basis points to 7.25 per cent in its Mid-term Review (October 2006) while leaving the reverse repo rate unchanged at 6.00 per cent – there has, thus, been a cumulative increase of 150 basis points in the reverse repo rate and 125 basis points in the repo rate since the tightening began in October 2004.
The monetary measures have been supported by fiscal measures such as exempting imports of wheat, pulses and sugar from customs duty, reduction in customs duty on palm oils and restriction on exports of pulses. Pressures on primary articles prices, low stocks in case of wheat as well as shortfall in global production pose continuing challenges for monetary management.