Inflation in the world's fourth-largest economy reached 6.09 percent in the first week of the current fiscal year beginning April 1, against 5.74 percent the previous week.

The central bank aims for inflation between 5.0 to 5.5 percent.

The Reserve Bank of India (RBI), which has warned of overheating with the economy growing at around nine percent a year, has raised short-term lending rates twice this year, by a quarter of a percent each time, to 7.75 percent.

The rate is now at its highest level in more than four years and the amount of cash that commercial banks must hold on deposit has been raised by 50 points to 6.50 percent.

But analysts said that in the latest quarterly review of monetary policy, the RBI will keep its powder dry and try to talk down inflationary expectations.

"We expect the RBI to keep policy interest rates unchanged for the remainder of the year," said Rajeev Malik, Asia economist with JP Morgan Chase in Singapore, adding that more "hikes are likely" later this year if inflation remains higher than forecast.

A day before the policy review, the benchmark Mumbai stock exchange 30-share Sensex index crossed the 14,000 points level intraday, its highest level in nearly two months, as investors also discounted a rate hike.

"Recent monetary tightening has been stringent, swift and unexpected. It is maybe too soon since the previous round to tighten again," said Manika Premsingh, chief economist with brokerage Edelweiss Capital.

The bank is seeking to curb fast credit growth which has been fuelling inflation by hiking rates as well as requiring banks to set aside more cash as reserve to drain money from the banking system.