The Reserve Bank of India raised its repurchase (repo) rate by 25 basis points to 5.5%, its first interest rate increase in nearly four years, amid mounting inflation risks and continued strong economic growth.

The decision came as Indian markets faced pressure from higher oil prices and tighter global financial conditions, along with concerns that adverse weather could push up food prices.

Sachchidanand Shukla, chief economist at Larsen & Toubro in Mumbai, said the rate increase had been largely expected by markets, while the shift in the monetary policy stance signals the central bank's readiness to keep tightening even if food or crude oil prices fall.

Radhika Rao, senior economist at DBS Bank in Singapore, linked the October decision to growing inflation risks tied to the economic cycle, noting that the shift in policy stance reinforces the Monetary Policy Committee's direction towards further tightening.

Rao attributed the decision to the combined pressures of oil prices, global financial conditions and food inflation risks, which prompted policymakers to act early to bolster the central bank's inflation-fighting credibility before those pressures became more entrenched.