India's headline inflation likely eased in November to 9.04 percent from 9.73 percent the month before as food prices fell to their lowest in nearly three-and-a-half years, a Reuters poll showed.
Forecasts for November's wholesale price inflation from 27 economists polled this week ranged from 8.69 percent to 9.50 percent.
Annual food inflation dropped to its lowest level since August 2008 in late November, mainly because of sharp declines in prices of vegetables and protein-rich food.
Rupa Rege Nitsure, chief economist at Bank of Baroda, said she expects inflation for November to ease partly due to sequential easing in prices of food articles, non-food articles and minerals, and partly due to a high statistical base.
The wholesale price index, India's key inflation gauge, has remained stubbornly above the 9 percent mark for nearly a year now.
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In response, the Reserve Bank of India RBI.L has raised its key interest rates 13 times since early 2010 and is now widely expected to pause at its policy review on December 16.
"The RBI will be looking closely at the non-food manufactured component," said Andrew Kenningham, economist at Capital Economics.
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India's industrial output likely declined for the first time in over two years in October, hurt by a slowdown in export growth and partly due to a higher statistical base, a Reuters poll showed on Thursday.
Food price inflation was at 6.60 percent in the year to November 26, down substantially from an annual 8.00 percent in the prior week. The fuel price index was up 15.5 percent annually, unchanged from the prior week.
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The Indian central bank said in its October meeting that further rate increases may not be required, if the inflation trajectory conforms to projections.
A depreciation in the Indian rupee, which has shed over 13 percent so far this year, has also added to inflationary pressures as India imports a majority of its oil requirements.
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India slashed its full-year growth forecast amid slowing domestic and global demand, with officials warning the government was facing a serious balance of trade problem and will have a tough time meeting its fiscal deficit target.
If data shows inflation rose above 9.50 percent, the 10-year government bond yield could rise 15 to 20 basis points and the one- and five- year overnight indexed swap rates could jump 25-35 basis points, each, traders said.
A print at 8.75 percent or below could see the benchmark bond yield ease 10 to 15 basis points and OIS rates could fall 5 to 10 basis points, they said.
An inflation print between 8.90 percent and 9.20 percent is unlikely to cause much movement in the market, according to traders.