India’s benchmark 10-year bond yield rose 6 basis points to 6.75 percent after the decision, but the rupee was range-bound at around 64.94 per dollar after earlier strengthening to as much as 64.8825.
The broader NSE share index was down 0.2 percent for day, after strengthening slightly following the RBI statements.
The consumer inflation rate climbed to 3.65 percent in February from a year earlier, picking up from its lowest levels in at least five years to approach the RBI’s target of 4 percent.
The RBI is concerned that food prices could spike should India experience a below-average monsoon season in the middle of the year. It is also monitoring core inflation, which has stubbornly stayed around 5 percent for several months.
The state of the global economy is also weighing heavily within the RBI, as the U.S. Federal Reserve’s tightening gives additional pause to central banks around Asia, with Australia this week becoming the latest one to hold rates.
India seems in good stead after attracting $8.85 billion in investment into debt and equities in March – the most since at least 2002 – sending the broader NSE share index to a record high and the rupee to a nearly 1-1/2 year high.
But the RBI has long worried about sudden reversals of foreign flows, after first-hand experience in 2013 when worries about Fed tightening plunged India into its worst currency crisis in more than two decades.
