The Reserve Bank of India is reported to have increased repo and reverse the rates by 50 points each, which is higher than expected. Hence, the repo rate which RBI lends banks has surged to 8%, while reverse, the rate it borrows has gone up to 7%.

Also, the cash reserve ratio was still the same at 6% and Anant Narayan of Standard Chartered Bank, stated: "This policy action was out of syllabus and to that extent the market will recalibrate its expectations and reactions subsequently”.

However, the increase is said to indicate that, there had been ‘frontloading of the rate cycle’, as most people expected 25 bps this time along with 25 bps in September and the Governor has totally eliminated the uncertainty that frontloaded hike, is now going to be majorly data-dependent.

Moreover, Robert Prior-Wandesforde, Head of India and South East Asia economics at Credit Suisse is reported to have recommended the action of RBI, as he said: “the bank should have been much more aggressive in raising rates earlier. India faces a big problem in terms of this price/wage spiral and extremely elevated inflation expectations. It needs to break that wage/price spiral”.