Rajan listed some upside risks to the economy: A sub-normal or delayed monsoon due to El Nino effect, impact of geo-political tensions on fuel prices and uncertainties over the government's administered prices for various commodities. At the same time, he also felt these appear to have been balanced by the possibility of stronger action on food supply, better fiscal consolidation and recent appreciation in the value of Indian rupee.

"Accordingly at this juncture, it is appropriate to leave the policy rate unchanged, and to allow the disinflationary effects of rate increases undertaken during September 2013-January 2014 to mitigate inflationary pressures in the economy," he said. "Contingent upon the desired inflation outcome, the April projection of real GDP growth from 4.7 percent in 2013-14 to a range of 5-6 percent in 2014-15 is retained with risks evenly balanced around the central estimate of 5.5 percent."

He also nudged the government to do its bit like easing domestic supply bottlenecks and proceed with reviving stalled projects which should brighten the outlook for both manufacturing and services. The resumption of export growth is a positive, he added. The stock markets, for a moment, did not take kindly to the apex bank's stance. The key sensitive index (Sensex) of the Bombay Stock Exchange (BSE) even fell 30 points. But it immediately staged a recovery and eventually closed 175 points, or 0.7 percent higher.

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