India's central bank says the country's economic prospects are unlikely to improve in the near future because of slowing reforms and high inflation.
In its annual report, the Reserve Bank of India (RBI) said poor monsoon rains, which run from June to September, have further clouded growth prospects, but the key was to cut government subsidies and revive capital spending.
"Macro-economic conditions are unlikely to improve in the near term as a spell of policy stasis, structural and cyclical problems have combined to slow down the economy," the report said.
The bank reiterated that inflation was "sticky" and that controlling it remained the "cornerstone" of monetary policy.
While other central banks around the globe have been easing interest rates to revive their troubled economies, the RBI has said that economic reforms are needed first in order to remove chronic bottlenecks in the economy.
Last month the bank kept interest rates on hold, and economists saw Thursday's report as an indication that it may not lower rates quickly, despite growing pressures amid slackening growth.
Wholesale inflation stands at 6.87 per cent - above the bank's comfort level of five to six per cent - while the consumer price index, which covers a smaller band of goods, is at 9.86 per cent.
India faces a host of economic problems and gross domestic product grew by just 5.3 per cent between January and March, its slowest annual quarterly expansion in nine years.
"The RBI is trying to delay the inevitable (of cutting rates). But growth pressures will be huge going ahead," said Siddhartha Sanyal, chief India economist with Barclays Capital.
Indian business leaders are keenly awaiting the new pro-market finance minister P Chidambaram to take steps to restore foreign investors' faith in Asia's third-largest economy and "restart the growth engine".
But they face the prospect of more legislative deadlock and stalled reforms after India's opposition vowed this week to block parliamentary proceedings until Prime Minister Manmohan Singh resigned over a coal scandal.
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