India's inflation slowed unexpectedly in July to 6.87 percent from a year earlier, data showed on Tuesday, giving the central bank more room to cut interest rates to spur a slowing economy.
The July headline reading was significantly below the median forecast of 7.4 percent in a poll of 17 economists by Dow Jones Newswires and also below the reading for June of 7.25 percent.
India's central bank has been under political and business pressure to cut rates to help boost the economy, but inflation has been seen by analysts as too high to sharply reduce the cost of borrowing.
While still above the bank's comfort level of five to six percent, the July inflation figure may make it easier for the bank to cut rates at its next policy meeting in September, analysts said.
India's once-booming economy grew by just 5.3 percent between January and March -- its slowest annual quarterly expansion in nearly a decade.