India's headline inflation fell sharply to 1.77% in October 2014 as compared to 2.38 % in the previous month. It came below market expectations of 2%. Aug WPI inflation revised to 3.85% from 3.74% earlier.

Madan Sabnavis, economist at CARE Research opined, "The lowering of inflation for the fifth consecutive month is indeed a positive sign for the economy. However, these numbers should be viewed with caution. The base effect is pronounced and will be so in November too."

Also, the Ministry of Agriculture has forecasted lower kharif output for cereals, pulses and oilseeds; this could result in some upward bias on inflation in the coming months.

"There could be a strong case for the RBI to consider a rate cut given the continuous decline in the CPI and WPI inflation numbers in the last few months. However, the RBI may defer the decision for the next review, depending on how the inflation moves in the coming months,'' Sabnavis added.

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