India keeps interest rates on hold

MUMBAI, Apr 1 (AFP): India's central bank kept key interest rates steady on Tuesday in a widely anticipated move less than a week before the start of national elections.

After a meeting in the financial capital Mumbai, the Reserve Bank of India (RBI) said the benchmark repo rate, at which it lends to commercial banks, would remain at 8.0 per cent.

"At the current juncture, it is appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy," RBI governor Raghuram Rajan wrote in his statement. The RBI last raised rates on January 28, the third hike since September last year as part of its battle against high inflation.

Most economists had predicted Tuesday's decision as India's most widely watched inflation measure-the Wholesale Price Index-fell to a nine-month low of 4.68 per cent in February from 5.05 per cent a month earlier.

Rajan remained concerned by retail inflation, however, due to the possibility of a weaker-than-normal monsoon and adjustments to state-controlled prices of agricultural commodities.

Economists had underlined that India's parliamentary elections, set to begin next Monday, would make the RBI cautious about making any changes to its policy.

"RBI is facing a lot of uncertainties. The question of whether we will get a stable government or not is yet to be answered," Rupa Rege Nitsure, chief economist at Bank of Baroda, told the news agency.