India's central bank announced on Tuesday that it is to keep its key interest rate unchanged at 7.25 per cent.
The repo rate at which Reserve Bank of India (RBI) lends to the system has been retained at 7.25 per cent, and the cash reserve ratio will also be held unchanged at 4.0 per cent, in line with market expectations.
RBI says in its monetary report that it will roll back recent liquidity tightening measures when stability returns to the currency market, to revive its economic growth. "While recent liquidity tightening measures instituted by the Reserve Bank to curb volatility in the exchange rate provide at best some breathing time, it is important to push through structural reforms necessary to inspire the trust and confidence of both domestic and foreign investors," says the review by the central bank's research team.
RBI has also lowered its Gross Domestic Product (GDP) forecast for Fiscal year 2014 to 5.5 percent from 5.7 percent earlier.