India’s central bank unexpectedly left the policy interest rate unchanged to support growth while saying it will act if Asia’s fastest consumer-price inflation fails to ease in the nation of 1.2 billion people.
India’s government pledged to reduce the fiscal gap to the lowest in seven years in an interim budget before elections due by May, while boosting defense spending and cutting taxes on cars, mobile phones and television sets.
An Indian central bank committee proposed adopting a 4 percent consumer-price-inflation target by 2016 as part of a sweeping monetary-policy overhaul, a shift that signals elevated interest rates if adopted.
India central bank Governor Raghuram Rajan signaled he’s preparing to follow through on proposals to make inflation the bank’s top priority even at the risk of friction with Prime Minister Manmohan Singh’s government.
Raghuram Rajan’s surprise move to hold India’s benchmark interest rate gives the central bank chief firepower to act if the U.S. Federal Reserve’s guidance on monetary stimulus again triggers a plunge in the rupee.