In a surprise move, the Reserve Bank of India kept the repo rate unchanged at 6.50 percent- the rate at which it lends money to commercial banks. The reverse repo rate was also retained at 6.25 percent.

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"The decision was consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for CPI inflation of 4 percent," RBI said in its policy statement on Thursday.

The Monetary Policy Committee (MPC) voted 5:1 in favour of a status quo, with only Chetan Ghate voting for a 0.25 percent hike.

The MPC headed by RBI Governor Urjit Patel said that the recent excise duty cut by the government on petrol and diesel will help contain inflation.

"... it is a bit surprising," said Sajjid Chinoy, chief India economist at JPMorgan, after the policy announcement.

Taimur Baig, MD & chief economist at DBS Group Research, criticized the central bank's decision. "I will be blunt, I think it was a mistake," said Baig.

"The whole world is going through a major recalibration in terms of monetary policy and India does not live in a vacuum. So the fact that the Fed is raising rates, the fact that emerging market economies are raising, it sort of puts the onus on the Reserve Bank of India to also not being left out; that is issue number one," added Baig.

A majority of the economists in CNBC-TV18's Citizen's MPC voted in favour of a rate hike.

The government welcomed the MPC’s assessment and noted its decision to maintain the policy rate.

The next meeting of the MPC is scheduled on December 3.

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First Published:Oct 5, 2018 2:32 PM IST