The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, rose to 50.7 in February from 50.4 in January. That beat a Reuters poll median of 50.3 and was the highest level since November.
A Reuters poll last week, conducted before the government presented its annual Budget, showed 28 of 46 participants expected the RBI on Wednesday to cut the repo rate by 25 basis points to 6.0 percent, its lowest since November 2010. Another two expected a 50 bps cut.
The six-member panel, which brainstormed over two days, unanimously agreed that inflation was unlikely to gallop past the tolerance threshold of 6 percent in the next few months.
The August inflation number clearly gives the new governor space to open his account on a friendly note with an interest rate cut. The more tricky part to guess is whether the governor will resist the pressure to cut again in the December 6 policy.
Reaching the target may be easy, but will the central be able to keep a leash on inflation without supportive fiscal policies?
In a recent speech, Finance Minister Arun Jaitley called for lower deposit rates in the economy, saying high interest rates on savings instruments translate into higher cost of lending and lead to sluggishness in the economy.
Rupee range for H2/2016 is set at 67-70 against H1/2016 outlook at 66-69, with marginal time-decay value adjustment.
Contraction in prices is estimated to be lesser on the back of hardening food inflation, reports CNBC-TV18. The WPI numbers will come at noon.