By Manoj Kumar
NEW DELHI (Reuters) - India's retail inflation picked up in October to a seven-month high, driven by faster rises in prices of food and fuel products, dampening chances of an interest rate cut by the central bank next month.
India's annual consumer inflation <INCPIY=ECI> in October increased to 3.58 percent from a year earlier, government data showed on Monday.
Analysts polled by Reuters had expected October's CPI inflation rate would edge up to 3.46 percent from September's 3.28 percent.
Some analysts expect India's decision on Friday to slash tax rates on 178 items such as chocolates and detergent powders to 18 percent from 28 percent could marginally lower retail inflation in coming months.
"There is, however, a low likelihood of a rate cut by the RBI in the immediate term," said Aditi Nayar, an economist at ICRA, an Indian arm of the rating agency Moody's, adding that inflationary expectations could remain high in the second half of the fiscal year that ends in March.
RBI holds a policy review on Dec. 6.
Retail inflation has been steadily rising since June, when it eased to 1.46 percent - its slowest pace since India started releasing such figures in January 2012, based on combined data for rural and urban consumers.
Separately, annual industrial output <INIP=ECI> grew a lower-than-expected 3.8 percent in September, compared with the forecast of 4.2 percent by economists in a Reuters poll, data released on Friday showed.
Prices pressures are building just as the Reserve Bank of India projected last month inflation to rise in October-March to 4.2-4.6 percent, above its medium-target of 4 percent, while leaving rates unchanged.
Crude prices have rallied, sending Brent crude to its highest since June 2015, a worry given that India imports most of its energy needs.
Despite a cut in taxes, retail petrol prices have gone up by 7.6 percent and diesel by 6.6 percent in New Delhi in the last year.
Prime Minister Narendra Modi, who faces crucial state elections in his home state of Gujarat next month, is under pressure to revive economic growth, which slipped to 5.7 percent in the April-June quarter, the slowest pace in three years.
New Delhi, facing risks of a widening fiscal deficit this year mainly due to lower growth in revenue receipts, wants the RBI to ease policy rates to support private investments and revive economic growth.