The Reserve Bank of India (RBI) on Friday said it saw significant risks to growth ahead as it cautiously left interest rates unchanged amid concerns over an industrial slowdown.
Concerned over declining growth, the RBI kept the repo rate — the rate at which the RBI lends to banks — constant at 8.5% in its mid-quarter monetary policy review.
Expecting inflation to be in projected territory of 7%, it signaled that further rates hikes may not be warranted."While inflation remains on its projected trajectory, downside risks to growth have clearly increased," the RBI said.
In order to bring down inflation, which has been hovering around 9%, the central bank has hiked the repo rate 13 times by a cumulative 3.5 percentage points since March 2010.
In the fight against inflation, economic growth moderated to 6.9% in the second quarter of the current fiscal from 7.7% in first quarter and 8.1% in the year-ago period.
The RBI reiterated its view expressed in the previous policy that it might not hike rates further.
The RBI also decided to retain the cash reserve ratio — the amount banks need to park with the RBI — at 6% stating that there is sufficient liquidity in the system “There are currently no significant signs of stress in the money market,” the RBI said.