MUMBAI (Reuters) -Economic activity in India remains strong, with the agriculture and services sectors doing well, India's central bank governor said on Wednesday, commenting on fears of slowing growth.
Inflation, however, remains a challenge and the next move on interest rates must be weighed carefully, Shaktikanta Das, governor of the Reserve Bank of India (NS:BOI), said at an event.
"(Economic) data which is coming in is mixed. But the positives outweigh the negatives and, by and large, underlying activities remain strong," Das said.
Corporate earnings for the July-September quarter have shown weakness in urban consumption, with fast moving consumer goods (FMCG) firms reporting flat or declining volume growth.
High-frequency indicators, such as the purchasing managers index for manufacturing and services, slowed in September but rebounded in October.
Das said he would not "rush to say the economy is slowing".
Last month, the RBI retained its growth forecast for the current financial year at 7.2% and while it maintained interest rates, it eased its monetary policy stance to 'neutral' from 'withdrawal of accommodation', opening the door to rate cuts.
High food costs has led to inflation accelerating recently -- from 3.65% in August to 5.49% in September -- and Das said the October inflation print, due next week, is going to be "very high".
"A change in stance doesn't mean there will be a rate cut in the very next meeting," Das said.
A Reuters poll showed that a small majority of economists expect the RBI to cut rates in December.