Jan. 11 (Bloomberg) -- India's inflation remained unchanged in the last week of December, holding below the central bank's 5 percent target for a seventh straight month and making further interest-rate increases less likely.

Wholesale prices rose 3.5 percent in the week ended Dec. 29 from a year earlier, the same as the previous week, the Ministry of Commerce and Industry said in a statement today in New Delhi. Analysts had forecast inflation at 3.52 percent.

The Reserve Bank of India has raised its benchmark interest rate nine times since October 2004 to help tame prices, succeeding in dragging down inflation from a two-year high reached in January 2007. The central bank next meets on Jan. 29 to review rates.

``The previous rate increases have slowed the demand for manufactured goods, helping inflation remain subdued,'' said N.R. Bhanumurthy, an economist at the Institute of Economic Growth in New Delhi. ``This is the right time for the Reserve Bank to reduce rates as that will help revive industrial output.''

Higher borrowing costs have crimped consumer demand for factory-made products. India's industrial production grew in November at the slowest pace in 13 months. Output increased 5.3 percent from a year earlier after gaining a revised 12 percent in October, a separate report today showed.

Oil Prices

``Inflation is expected to remain around 4 percent by the end of the fiscal year, even with an oil price increase,'' Bhanumurthy said.

Gains in manufactured prices, which account for 64 percent of the inflation basket, slowed to 3.52 percent in the week ended Dec. 22, the lowest since September 2006. Manufactured prices grew 0.2 percent in the latest week, today's report said.

Prime Minister Manmohan Singh this week set up a panel to suggest measures to reverse a slowdown in the pace of manufacturing growth, which accounts for 17 percent of the nation's $906 billion economy.

India today revised the inflation rate for the week ended Nov. 3 to 3.35 percent from 3.11 percent. The government revises the inflation rate after a delay of two months on additional price data.

                       Week Ended   Week Ended   Percentage
                        Dec. 29        Dec. 22       Change

Primary articles         222.1         222.4        -0.1
Fuel, power              330.2         330.2      Unchanged
Manufactured products    188.4         188.1         0.2
Food articles            220.6         221.2        -0.3
Fruits                   247.2         252.1        -1.9
Food products            194.9         193.2         0.9
Edible oils              176.2         174.2         1.1
Cement                   219.9         219.9      Unchanged
Total                    216.0         215.9         0.05

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.

Last Updated: January 11, 2008 02:10 EST