India's headline inflation slowed slightly in October but was still high enough to be a headache for the RBI and the government as they struggle to tame prices and revive flagging growth ahead of elections.
Wholesale prices - the country's main inflation gauge - rose an annual 7.45%, data showed on Wednesday. That was down from the 7.81% reported in September, as food and fuel prices rose less quickly, and less than the 7.96% predicted in a Reuters poll of analysts.
"The number is better than what most people had expected, but based on the past experiences there is a likelihood of the numbers getting revised," said Rupa Rege Nitsure, Chief Economist, Bank of Baroda, Mumbai.
The government revised up August inflation to 8.01% from 7.55% initially reported.
With the economy on track to post its weakest growth in a decade, the government is pressing the central bank to help revive economic activity ahead of a general election due in just over a year, with several state polls looming before that.
Dismal data on Monday saw the monthly trade deficit climb to its highest-ever level and a surprise contraction in industrial production, dashing hopes that the economy was regaining traction.
But the Reserve Bank of India has so far rebuffed calls for lower interest rates, saying prices are still rising too fast to risk loosening policy much.
The next monetary policy review is due in December.
"The Reserve Bank will wait till the headline inflation falls by 100 basis points more. The government is putting pressure, but the Reserve Bank will not succumb to that pressure until the inflation comes down to the comfort zone," Rupa Rege Nitsure said.
Prime Minister Manmohan Singh said in a speech over the weekend that his government had "dispelled doom and gloom" about the economy with a series of policy steps, including curbing fuel subsidies and liberalising foreign investment rules.
But investors are clamouring for the government to do more. They want Singh to push ahead with a reform agenda that has progressed fitfully, calling for a more business-friendly tax regime and speedier clearances for infrastructure projects.
For its part, the government is trying hard to get the economy back on track to bolster its re-election bid in 2014.