At an RBI meeting in early August, Rajan reaffirmed his commitment to bringing down inflation and said it was "appropriate to continue maintaining a vigilant monetary policy stance".

Consumer price inflation cooled to 7.80 percent in August from 7.96 percent in July.

But, it is still far higher than the 6 percent level the RBI wants it at by January 2016, and as risks of a temporary spike from escalating food prices still exist three economists expect a hike in the repo rate in the next six months.

Sluggish investments, stalled projects, government policy paralysis and high interest rates meant India`s economic growth has been running at a shadow of the near double-digit levels seen in 2010.

In the quarter ended in June, the lumbering economy notched its fastest growth in two-and-a-half years, accelerating to 5.7 percent to raise hopes that the worst was over.

Stock markets have rallied since Prime Minister Narendra Modi took charge in May on hopes his government will rapidly usher in reforms and attract foreign investment.

But New Delhi`s failure to introduce any big-ticket reforms has dented much of that optimism, putting a spotlight back on the RBI to help boost growth through credit and interest rates.

"Governor Rajan is acutely aware of the trade-off in growth, but what he is trying to achieve is the credibility of inflation targeting," said Vishnu Varathan, senior economist at Mizuho Bank in Singapore.

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