Inflation declines to 7.24% due to lower vegetable prices

The central bank has said any interest rate cut is "highly improbable" at the policy meeting on Tuesday. But given the sharply lower number, some analysts now see an outside chance the bank will change its mind.

"Given the food and manufacturing prices are much better behaved than what many private analysts had predicted, we expect inflation by March-end to be sub-7 percent," said A Prasanna, an economist at ICICI Securities in Mumbai.

"There is nothing that should stop them from cutting rates in December," Prasanna said.

Rating agency Standard & Poor's warned again on Tuesday that India's credit rating faces a one-in-three chance of being downgraded to junk over next 24 months because of a heavy debt burden and pressure on the fiscal deficit, which is seen overshooting a target of 5.3 percent in the fiscal year ending in March.

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