The Reserve Bank of India (RBI) kept the benchmark repo rate unchanged at 6.75 percent after lowering it by 50 basis points for front-loading policy action in September.
The RBI has cut the repo rate four times (125 basis points) since January 2015. The RBI has also left CRR and SLR unchanged at 4 percent and 21.5 percent respectively.
"We will use the space for further accommodation, while keeping an eye on inflation," said RBI Governor Raghuram Rajan.
The RBI has also kept economic growth projection unchanged at 7.4 percent for FY16. However, the central bank has cautioned that the uptick in CPI inflation ex-food and fuel warrants vigilance.
"While oil prices, barring geopolitical shocks are expected to remain benign for a few quarters more, the uptick of CPI inflation excluding food and fuel for two months in succession warrants vigilance," the RBI statement said.
The RBI in fact expects inflation to rise further until December. The central bank has also kept the reverse repo rate under the LAF unchanged at 5.75 percent, and the Marginal Standing Facility (MSF) rate and the bank rate at 7.75 percent.
Rajan also said that he is focusing on transmission and has barely seen half the rate cuts since January. He said the economy is certainly seeing early stages of recovery with some areas of continued weakness.
"On the domestic front, provisional estimates of gross value added (GVA) at basic prices for Q2 of 2015-16 rose on the back of acceleration in industrial activity.
Other indicators suggest the economy is in the early stages of a recovery, though with some areas of continued weakness.
