The Reserve Bank of India (RBI) on Tuesday hiked the repo rate by 25 basis points to 7.75%. The Marginal Standing Facility ( MSF) was cut by 25 basis points.

Meanwhile RBI's second quarter 'Macroeconomic and Monetary Developments' review has pointed out that a continuous policy logjam, particularly associated with delayed clearance on the part of the government, and inadequate appraisal mechanisms on the part of financiers, brought the infrastructure sector to a standstill. The Reserve Bank of India said project delays have been slowing down India's growth.

As of June, about 50% of central sector projects (of Rs 150 crore and above) were delayed, up from 44% in June 2008, for which the cost overruns rose from 12% to 20% in the last five years.

Delayed projects were high in sectors such as roads, followed by power, petroleum and railway.

On the fuel front, there have been concerted efforts to reduce the extent of suppressed inflation in the segment. With the rise in fuel prices, there has been a significant slowdown in consumption in the recent past.

However, the Reserve Bank suggested further upward adjustment in fuel prices, given the still large under-recoveries, to dampen demand and restrain the twin deficits — fiscal and external. But the rise in fuel prices pushes inflation higher and may force RBI to continue with its strategy to keep policy rates high to rein in inflation by overlooking growth.