Hours after Reserve Bank of India (RBI) governor Duvvuri Subbarao ignored finance minister Pranab Mukherjee’s covert goading, Fitch Ratings downgraded India’s outlook to negative from stable.

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The move on Monday comes just a week after rival Standard & Poor’s said India could lose its investment-grade rating if things continue the way they are.

If that was not enough, came data that India’s consumer price inflation remains firmly in double digits, touching 10.36% in May from 10.26% in April.

The RBI says it can’t cut rates because risks to inflation are high with the government remaining recklessly profligate and there being no hint of reforms happening.

It reasoned the economy doesn’t need lower rates now; -- what it needs is the government getting its house in order by biting all bullets.

“It is to the central bank’s credit that it managed to stand up to the pressure from the government and businesses, and remains justifiably concerned about inflation,” Rajeev Malik, an economist at CLSA in Singapore, said in a client note.

In another way, the RBI is also keeping its ammunition ready, should there be a shock event in the euro zone that will require another fiscal stimulus package.

“Unless the government takes steps on fiscal adjustment, the RBI is not prepared to cut rates. Based on this document, there’s unlikely to be a rate cut in July,” said A Prasanna, economist at ICICI Securities Primary Dealership in Mumbai.