The easing of key price indices makes the context favourable for a rate cut by the Reserve Bank of India (RBI) at its next monetary policy review due in Februray 2017.
The string of holidays including Diwali in November last year where factories were shut could also partly explain fall in industrial output during the last year, making production growth look larger in 2016.
Factory output measured in terms of Index of Industrial Production (IIP) got a push in November 2016 due to better performance of manufacturing, mining and electricity sectors coupled with larger offtake of capital goods, considered a barometer of investment.
The factory output, as per the Index of Industrial Production (IIP), declined by 1.81 per cent in October and a 3.4 per cent slide in the corresponding month of past year.
The Consumer Price Index (CPI)-based inflation stood at 3.63 per cent in November 2016, as per the data released by the Ministry of Statistics and Programme Implementation.
Similarly, electricity generation grew at 8.9 per cent in November compared to a meagre 0.7 per cent a year ago.
Ratings agency Crisil said the lowest food inflation in 2 years was "a result of cooling prices thanks to good agricultural supply, cash crunch-led slide in price of perishables and a high base".
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However, during the April-November period the sector recorded a contraction of 0.3 percent compared to a growth of 3.9 percent.
Inflation rate moved from 9.55 percent in December 2015 to 18.55 by December 2016, defying predictions that put 2016 year-end inflation at 12 percent.
During April - November, industrial production rose 0.4% compared to 3.8% during the corresponding period of previous year.
Capital goods production increased by 15 per cent in November compared to a decline in production by 24.4 per cent earlier.
The mining sector output growth was at 3.9% in November, compared with -1.1% in October and -3.1% in September.
Food inflation in December stood at 1.37 in December 2016 against 2.11 per cent in November and 6.40 per cent in December a year ago. Other protein-based food items such as meat and fish became dearer by 4.79 per cent.
However, inflation in fruits came in at 4.74 per cent, slightly up from November's 4.60 per cent. Cereals and products at 5.25 per cent too showed a rise in inflation print during the month against 4.86 per cent in November.