The rate differential between US and India, that stands at 800 basis points is far higher than the average 460 basis points since January 2003.

Moreover, assuming normal rains, stable oil prices and a stable rupee, the country's CPI (Consumer Price Index) inflation is expected to come off to 6 per cent levels by January 2016 in line with the central bank's targets.

Soon after taking the reins of RBI in September last year, governor Raghuram Rajan surprised the industry by hiking the short-term policy rate by 0.25 per cent to keep inflation under check. The repo rate or the short term lending rate was increased to 7.5 per cent from 7.25 per cent.

Subsequently, RBI raised repo rate by another 0.5 per cent to keep inflation under check. However, it has kept interest rate unchanged since April this year.

In the recent monetary policy review, RBI kept policy rate static at 8 per cent citing upside risks to inflation in view of uncertain monsoon and its impact on food production as also volatile international oil prices.

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