The Reserve Bank of India said its benchmark “repo rate”, the level at which the central bank lends to commercial banks, would stay unchanged at 6.50%.

Interest rates were hiked by 2.5 percentage points between May 2022 and February 2023, but have stayed constant since then.

India’s economy — which is projected to grow at a brisk 7.3% in the financial year ending March 31 — has performed “remarkably well”, central bank governor Shaktikanta Das said.

Last week, India announced a smaller-than-expected fiscal deficit for this financial year, while shunning populist spending in the last budget before national elections expected to begin in April.

Retail inflation in India hit 5.69% in December 2023, higher than November’s 5.55%, and well above the central bank’s target of 4%.

India’s “core” inflation, which excludes food and fuel costs, stood at 3.8% in December.

Das, speaking in the financial capital Mumbai, said the central bank was “resolute” in its commitment to pursue an “actively disinflationary” monetary policy.

The RBI’s monetary policy committee “will carefully monitor any signs of generalisation of food price pressures, which can fritter away the gains in easing core inflation”, Das said.