The Reserve Bank of India surprised markets by keeping its repo rate — the rate at which it lends to other banks — unchanged at 5.15%.
"This is an adjustment that people have to be accustomed to and it takes time. But next year, I believe that this will do well — they would have made this adjustment and realize the reforms are having an impact," Mobius said, adding he remains bullish on India. ManyThe central bank had already cut the repo rate by 135 basis points this year to stem the economic slowdown.
For its part, the RBI said in its policy statement it felt appropriate to pause at this stage in light of the current growth-inflation dynamics. Aziz said apart from inflation concerns, another reason that could explain the central bank's decision Thursday is a worry over India's growing fiscal deficit.
"I think the other reason could be, which they did not state, is that they are concerned about what happens to the fiscal deficit outturn," he said, adding, "there's a possibility that in February, when the budget comes out, the outturn could be much worse than what people are thinking."
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