It has been reported that Reserve bank of India is likely to keep the rates same in April 1, 2014 monetary policy review. In order to lower the inflation RBI will not hike rates, however since September RBI has raised interest rates three times by 25 bps each. If the apex bank raises the rates, the banks automatically needs to hike the rates to match them.
The hike in rates will decline the demand and will slow down the inflation quickly but this will damage the economy. Keeping the status of economy in mind RBI may not hike the rates this time. Mr. Rajan RBI governor stated that they prefer to dis-inflate over time rather than abruptly. Further he added that besides developing the financial sector through monetary policy, it is necessary to bring down the inflation over a reasonable period of time.
It is necessary to keep a proper focus on the financial stability of the country, and to maintain the financial stability it is important to control the inflation.