Bombay (awp/afp) – The Central Bank of India (RBI) kept its benchmark interest rate unchanged at 6.5% on Thursday for the second straight time, citing easing inflationary pressures while warning against an uncertain global outlook.

“The monetary policy committee has decided to remain focused on withdrawing accommodative measures to ensure inflation is gradually in line with the target while supporting growth,” the bank’s governor Shaktikanta Das said in a video conference.

“Primary inflation remains above target, and staying within a tolerance range is not enough. Our hope is to achieve the target of 4.0% going forward,” added the governor, whose announcement was in line with economists’ expectations.

Inflation fell to 4.70% in April from 5.66% in March, a sharp drop from a peak of 7.79% reached in April 2022.

India’s economic activity grew by 6.1% year-on-year in the final quarter of the 2022/2023 fiscal year ending in March, bringing annual growth to 7.2%, according to official figures.

The South Asian country of 1.4 billion people, the world’s most populous after China, is experiencing one of the fastest growth rates of any major economy.

Central banks around the world, including the RBI, quickly raised borrowing costs to control consumer prices, exacerbated by the war in Ukraine.

Even though India’s inflation is declining, Das warned of the risk factors for the El Nino weather phenomenon, which could weaken the monsoon and push up farm prices.

Agriculture is the cornerstone of India’s economy and the annual monsoon is very important for India’s agricultural production.

“Careful and continuous monitoring of the evolution of the inflation outlook is absolutely necessary, especially as the outlook for the monsoon and the impact of El Nino remains uncertain,” Das added.

“Geopolitical tensions, monsoon uncertainty and international commodity prices, especially sugar and rice, as well as crude oil and volatility in global financial markets pose a risk to inflation,” he continued.

Headline inflation is expected to reach 5.1 percent in the 2023-24 fiscal year, he said.

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