MUMBAI: India’s central bank kept interest rates on hold on Tuesday as expected as it awaits more proof that stubbornly high inflation is headed downward in Asia’s third-largest economy.

After a meeting in financial hub Mumbai, the Reserve Bank of India (RBI) said the benchmark repo rate, at which it lends to commercial banks, would remain at a steep 8 per cent.

Reserve Bank of India (RBI) governor Raghuram Rajan said that although headline inflation had slowed, the full impact of just-ended annual rains that are crucial for crop production is yet to be seen.

“There are risks from food price shocks as the full effects of the monsoon’s passage unfold, and from geo-political developments that could materialise rapidly,” Rajan said.

The rates hold was widely expected by economists, but business leaders have been clamouring for the bank to cut rates and bring down steep borrowing costs to spur sluggish economic growth.

Published in Dawn, October 1st, 2014