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The continued benign inflationary trajectory in Q3FY22 has increased the likelihood of further postponement of interest rate normalisation, said Acuite Ratings & Research on Saturday.

The assessment comes after India's October retail inflation inched-up sequentially on the back of a marginal rise in food prices along with high fuel and commodity prices.

Accordingly, data furnished by the National Statistical Office showed that Consumer Price Index (CPI) inched-up to 4.48 per cent last month from 4.35 per cent in September 2021.

However, on YoY basis, the rise in last month's retail inflation was slower than the 7.61 per cent rise recorded for October 2020.

"From India's monetary policy perspective, taking comfort from the current moderation in CPI inflation, the RBI in its last MPC meeting continued to advocate the need for nurturing the nascent growth recovery thereby maintaining its accommodative stance," the agency said.

"However, the central bank did make an attempt to nudge short term money market rates in upward direction by calibrating the liquidity surplus through the expansion of the scope of 'VRRR' auctions along with discontinuation of 'G-SAP' operations."

Besides, the ratings agency said that this might be a precursor to interest rate normalisation that can happen by December 2021.

"However, given RBI's approach of 'gradualism' and continuation of benign inflationary trajectory in Q3FY22 the likelihood of the postponement onto next quarter is on the rise."

On India's industrial output growth easing to 3.1 per cent in September, on a sequential basis, the agency blamed the recent surge in global commodity prices along with supply chain disruptions primary led by global semiconductor chip shortages and with the recent energy crisis

The rise in Index of Industrial Production (IIP) for September eased to 3.1 per cent from 12.03 per cent in August 2021.

However, on a year-on-year basis, the September out up showed an accelerating trend from a growth of just 1 per cent reported for the corresponding period of the previous fiscal.

"We continue to maintain our FY22 GDP forecast at 10 per cent. Factors that remain is favour of India's growth recovery include, near complete removal of lockdown restrictions, strong pick up in the pace of vaccinations, robust export growth with outbound shipments clocking a growth of 55.1 per cent in April-October 2021 and healthy run of Central government capital expenditure."

"Additionally, accommodative policy backdrop will continue to provide support to India's growth trajectory."