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New Delhi's ruling Congress Party, however, has proven itself unable
-- or unwilling -- to contain spending and enact tough policy change. It was routed in recent state elections, further weakening its ability to corral coalition partners and state leaders needed to push through reforms in India's unruly democracy. "I'm not sure another wish list will make a difference in actual changes on the ground," said Abheek Barua, chief economist at HDFC Bank in Mumbai. "That's the paradox. Despite all these things they want the government to do as preconditions for monetary easing, even in the absence of these things, they've cut rates." The central bank also said given weak global capital flows to emerging markets, financing the current account deficit
-- which has ballooned as the cost of importing oil has shot up and export demand has weakened
-- will "continue to pose a major challenge." The bank warned that India's December quarter current account deficit
-- a "very high" 4.3 percent of gross domestic product -- was "unsustainable and needs to be contained." "They've taken a response of supporting growth to the extent possible. Monetary policy can only bring India back to its potential growth rate, not beyond that," said Samiran Chakraborty, head of research at Standard Chartered in Mumbai. "The tension between the fiscal side and the monetary policy side will play on for most of this year."
[Associated
Press;
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