We build and calibrate a New Keynesian monetary business cycle model for the Indian economy to understand why monetary transmission is weak. Our main finding is that base money shocks have a larger and more persistent effect on output than an interest rate shock, as in the data. We show that the presence of an informal sector hinders monetary transmission. We show that financial repression, in the form of a statutory liquidity ratio and administered interest rates, does not weaken monetary transmission, which is contrary to the consensus view in policy discussions on Indian monetary policy. Our framework is general enough to be relevant for the study of monetary transmission in other emerging markets and developing economies.