New Delhi - India's inflation rate fell sharply to 8.98 per cent for the week ended November 1 from 10.72 per cent the previous week, raising hopes of further rate cuts by the Reserve Bank of India as industry figures indicated a slowing down of the economy.

The annualized inflation rate, which is linked to India's wholesale price index, had peaked in the week ended August 2 touching 12.91 per cent. The rate for the week ended November 3, 2007 was 3.35 per cent.

Analysts said a decline in fuel prices combined with good agricultural output and a fall in demand due to a slowing down of the economy had brought prices down.

The statistics released by the Finance Ministry is expected to bring cheer to the ruling United Progressive Front government which will be contesting elections in six states beginning Friday.

The Indian government tried to rein in runaway inflation by initially tightening monetary policy but the global financial crisis which led to a bleeding of stock markets and an industrial slowdown forced it to take measures to increase liquidity.

Investment bank Goldman Sachs on Monday lowered India's economic growth forecast for the financial year 2008-2009 to 6.7 per cent while Prime Minister Manmohan Singh said India still hoped to achieve growth of 7 to 7.5 per cent.

One of the world's fastest growing emerging economies, India has posted annual gross domestic product growth of over 9 per cent since 2006.

Indian stock markets were closed Thursday on account of a religious festival holiday. (dpa)