New Delhi, Oct. 8 -- Sustained oil price pressures amid hostilities in West Asia along with food-price escalation in an El Niño year could spark generalized inflation across India. So, the Reserve Bank of India (RBI) had little choice but to pivot its policy.

As widely expected, its rate-setting panel voted in one voice to raise RBI's repo rate-at which it lends short-term money to banks-by 25 basis points to 5.50%. The rates at which it absorbs and injects liquidity also saw a matching rise to keep that band stable at a quarter of a percentage point below and above that policy rate, respectively.

This is the first hike in more than three-and-a-half years. Inflation data explains RBI's worry. With India's retail price level in Augu...