India's central bank is expected to keep key interest rates on hold ahead of a monetary policy meeting Tuesday after declaring its focus is nursing the ailing rupee back to health.
"The priority for monetary policy now is to restore stability in the currency market so macro-financial conditions remain supportive of growth," the Reserve Bank of India (RBI) said in a report late on Monday.
Last week, the bank raised two short-term lending rates to ease pressure on the currency, hovering Monday less than two rupees above its record low of 61.21 rupees to the dollar earlier this month.
The RBI has held back from raising benchmark rates to support the rupee but warned in its report that growing macro-financial risks warranted "a cautious monetary policy stance".
The bank is under pressure from businesses to ease rates further to spur economic growth, which is running at a decade low of five percent.
But "the last thing the Reserve Bank would want to see is rupee depreciation get out of hand", said Credit Suisse economist Robert Prior-Wandesforde, ruling out a reduction in benchmark rates.
The rupee's sharp fall has pushed the RBI into crisis management mode.
The RBI kept rates unchanged when it met last in June -- after three successive rate cuts in 2013 -- citing concerns about the soft rupee and stubbornly high consumer price inflation.
The rupee has fallen 12 percent against the dollar this year.
India is caught in a vicious circle with its sluggish economy and ailing currency discouraging the foreign investment it urgently needs to help revive growth, economists say.
The meeting of bank policymakers was slated a day after Prime Minister Manmohan Singh met top business leaders to discuss the economy's woes.
He promised more reforms to spur growth to build on a string of market-opening measures the government began last September.
"The overall sentiment was on the need to bring back the (optimistic) mood, converting decisions to action and taking the country back to a growth path of eight percent or more," a statement by Singh's office said after the meeting.
The Congress-led government is anxious to see the economy gain traction before facing voters in polls due in the first half of 2014.
The growth slowdown, a ballooning current account deficit and stalled reforms amid a slew of graft scandals have taken the investment shine off India.
Finance Minister P. Chidambaram said separately in a speech that he did not expect any increase in main interest rates.
He urged the bank to keep growth in mind while setting monetary policy.
"The mandate of a central bank must not only be price stability. The mandate of a central bank must be seen as part of a larger mandate which includes price stability, growth and maximising employment," he said.