Signage for the Reserve Bank of India (RBI) in Mumbai, India, on Friday, April 5, 2024.
India's central bank expectedly kept the benchmark interest rate unchanged at 6.50% on Friday as it struggles to contain rising inflation without hurting growth in Asia's third-largest economy.
The decision came in line with economists' expectation in a Reuters poll, as India's consumer prices inflation surged to a 14-month high of 6.21% in October, significantly higher than the RBI's target of 4% and also above its tolerance ceiling of 6%.
The Reserve Bank of India has held the interest rate steady since February last year; however, a sharper-than-anticipated slowdown in India's economic growth has made the central bank's task tougher.
In the July to September period, India's economy grew 5.4% from a year ago, drastically missing Reuters-polled economists' expectation of 6.5%, and marked the slowest pace in nearly two years.
"At a time when we want industries to ramp up and build capacities, bank interest rates will have to be far more affordable," the finance minister said at an event in Mumbai last month.
The slowdown has prompted worries that the RBI's restrictive policies may be putting the economy at risk of missing its forecast of 7.2% growth for the year through March 2025.
Both Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal have reportedly called for lower borrowing costs to bolster lending demand and support a slowing economy.
The central bank chief Shaktikanta Das ruled out an immediate rate cut but shifted its policy stance to "neutral" from "withdrawal of accommodation" in October meeting. He stated that an immediate interest rate cut can be "very premature" and "very, very risky", emphasizing he was not eager to join global banks easing measures.
Indian rupee fell to record lows against the U.S. dollar earlier this week according to LSEG data; any monetary easing could put further pressure on currency possibly triggering capital outflows. The rupee last traded at 84.659 against USD.