India's central bank kept its main interest rates unchanged today.
The decision came despite facing pressure for a cut to spur borrowing and investment in the face of a worrying economic slowdown.
The Reserve Bank of India said the repo rate, at which it lends to commercial banks, would remain at 8%, while the reverse repo rate, which it pays banks for deposits, would stay at 7%.
The cash reserve ratio - the sum commercial banks keep on deposit - was also unchanged at 4.75%.
The move went against most economists' expectations of a further easing in rates by the RBI following its first reduction in three years in April, amid a host of economic problems for the once-booming Asian giant.
"While growth in 2011-12 has moderated significantly, headline inflation remains above levels consistent with sustainable growth," the RBI said in a statement.
The bank has been under pressure to help revive growth after the economy grew just 5.3% in January to March, its slowest quarterly expansion in nine years.
But hopes of an aggressive cut by the policy-makers in Mumbai were tempered by data last week showing a marginal rise in wholesale price inflation in May to 7.55% on an annual basis.
India cut its main interest rates by a higher than expected 50 basis points in April in a bid to spur faltering growth, after keeping them on hold since late last year. Rates were previously hiked 13 times from March 2010 in one of the most aggressive monetary policy tightening drives of any major economy.
Fitch downgrades India's outlook to negative
Fitch Ratings has downgraded India's credit outlook from stable to negative, saying that the country's growth potential will deteriorate without a quickening of structural reforms.
The latest blow to India's economy follows a similar downgrade by Standard & Poor's in April, with both agencies maintaining India's rating at BBB- but raising concerns over flagging growth and troublesome deficits.
A statement from Fitch called for measures to create a more positive environment for businesses and private investments.
"The negative outlook also reflects India's limited progress on fiscal consolidation and, in particular, on reducing the central government deficit despite improvement in the financial health of state governments," it said.
Fitch noted ''that India faces an awkward combination of slowing growth and still-elevated inflation".
Standard & Poor's warned this month that India could be the first of the BRIC major emerging economies to lose its investment-grade debt classification unless it revived growth and rekindled its reform agenda.