With inflation continuing to climb and the rupee approaching a record low, policymakers have been forced to change course, and the Reserve Bank of India is expected to raise interest rates on Wednesday for the first time in nearly four years.

Once it hikes, the Reserve Bank of India (RBI) will align itself with Asian peers that have already begun tightening policy, and it would also mark the first rate increase under Governor Sanjay Malhotra, who took office in December 2024 and led a series of rate cuts last year.

Of 41 economists surveyed by media outlets, 35 expect the six-member monetary policy committee to raise the benchmark rate, the repurchase rate, by 25 basis points to 5.50%, while the rest expect rates to stay unchanged.

The committee is expected to maintain a neutral policy stance, preserving room for further action.

Since the RBI's last policy meeting in August, inflation has accelerated further, oil prices have returned above $100 a barrel, the U.S. Federal Reserve has begun tightening policy, and the rupee has continued to weaken.

As the RBI stepped in to stabilize the exchange rate, foreign exchange reserves recorded the largest one-week decline on record.