Raghuram Rajan (R) during RBI news conference
Media playback is unsupported on your device
Video

'Everyone shocked' after India bank raises interest rates

India's new central bank governor Raghuram Rajan has raised key interest rates by a quarter of a percentage point in an attempt to reduce inflation.

The repo rate - the rate at which the central bank lends to commercial banks - was raised from 7.25% to 7.50%.

The BBC's Sameer Hashmi told BBC World: "[Mr Rajan] got a rock-star-welcome, but everyone is so shocked and surprised they don't know what to call him!"

He added that Mr Rajan had said that his short term priority was dealing with inflation, as that would hurt growth in the long term.

Go to next video: Can this man turn round India's banks?