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Steps taken by the government including liberalization of foreign investment in retail, aviation, broadcasting and insurance should help return the economy to a higher growth trajectory, the RBI said. Analysts cautioned that with India scheduled to hold general elections in 2014, there was a likelihood of further government sops leading to increased inflation and spending blowouts. Abheek Barua, chief economist at HDFC Bank, said the funding situation of banks is very tight and there is a limit to which they could pass on the central bank's lower interest rate. "The cut in the cash reserve ratio helps the situation only at the margins. Coupled with policy rate cuts, we might see small changes in consumer borrowing costs over the next few months," he said. "Nothing dramatic will happen unless the RBI follows through with a series of cuts and adds more liquidity to the system."
[Associated
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