India's wholesale prices fell for the ninth straight month in July, government data showed Friday, fuelling pressure for a further cut in rates.
The Wholesale Price Index (WPI), an inflation indicator that measures the biggest basket of goods, fell a sharper-than-expected 4.05 percent in July from a year earlier.
Economists polled by Bloomberg had expected wholesale prices to shrink 2.9 percent in July after a 2.4 percent drop in June.
India said Wednesday its consumer price inflation rate for the month had fallen to 3.78 percent, its lowest level in eight months.
Analysts said the figures would increase the likelihood of the Reserve Bank of India (RBI) cutting interest rates.
"The odds of a rate cut from the RBI in the upcoming policy are increasing," said Vivek Rajpal, interest rate strategist for Asia at Nomura Singapore.
RBI Governor Raghuram Rajan has cut rates by 75 basis points, but the RBI kept interest rates unchanged earlier this month, saying the country's economic recovery was still a "work in progress".
Rajan has said any further reduction would have to wait until after the annual monsoon rains, which can impact prices.