By Sarita Chaganti Singh and Nikunj Ohri
NEW DELHI (Reuters) - India's annual retail inflation edged down from the previous month and remained within the central bank's comfort zone amid cooling food prices, while industrial output rose at the fastest pace since June, easing concerns for policymakers.
The inflation print for December was below the central bank's upper tolerance level of the 2%-6% range for the second consecutive month.
Annual retail inflation rose 5.72% in December from 5.88% in the previous month, government data showed on Thursday. Analysts in a Reuters poll had predicted a December reading of 5.90%.
India's industrial output rose 7.1% in November compared to a contraction of 4% in the previous month, exceeding Reuters' forecast of 2.6%.
Food price inflation, which accounts for nearly 40% of the consumer price index (CPI) basket, eased to 4.19% in December from 4.67% in November, aided by lower vegetable prices. However, prices of cereals and milk continued to rise.
"We see another sub 6% CPI (retail inflation) print in January 2023," said Garima Kapoor economist at Elara Capital.
Excluding the volatile food and energy components, core inflation was estimated at 6.1%, according to two economists, versus 6% and 6.26% in November.
But most economists still expect the Reserve bank of India to raise rates in its February policy as core inflation remained sticky.
Kapoor said stubborn and elevated core price pressures will compel the central bank to hike rates by 25 basis points at its next policy meeting.
The Reserve Bank of India (RBI) has raised interest rates by 225 basis points since last May.
Bank of Baroda economist Madan Sabnavis said the rate hike in February could be the last one.
He added industrial output numbers need to perform beyond December before it is seen as a sustained trend.
(Reporting by Sarita Chaganti Singh; Editing by Toby Chopra, Chizu Nomiyama and Bernadette Baum)