India's annual industrial output grew 7.1 percent in December, data released on Monday showed, compared with 6.2 percent forecast in a Reuters poll.
The world's seventh largest economy is expected to grow 6.5 percent in the fiscal year ending in March, while the International Monetary Fund expects growth will pick up to 7.4 percent in 2018, and 7.8 percent in 2019 - driven by a pickup in domestic and global demand.
Meanwhile, India's retail inflation slightly eased in January from a 17-month high in December but remained above the 4 percent medium-term target of the Reserve Bank of India(RBI) for the third straight month.
India's measure of consumer price inflation, the CPI index, rose 5.07 percent in January from a year earlier, data released by the Ministry of Statistics showed on Monday.
Analysts polled by Reuters had predicted January's rate would ease to 5.14 percent from 5.21 percent in December.
Last week, the RBI held its main repo rate unchanged, for the third straight meeting. The central bank warned that it would closely monitor inflation but also said economic growth needed to be "carefully nurtured".
The central bank's statement was less hawkish than many expected, and prompted some economists to change their predictions of a rate increase in the next few months.
"I do not expect a rate hike for the next five to six months," said Raghvendra Nath, managing director of Ladderup Wealth Management.
He said apart from oil prices, the monsoon rains would be the key factor for inflation.
Consumer food prices rose 4.70 percent in January, compared with 4.96 percent in December, as prices of pulses fell 20.19 percent from a year earlier. Food prices have softened, reflecting eased vegetable costs following stepped-up arrivals in markets of fresh crops.
Fuel and light inflation stood at 7.58 percent compared with 7.90 percent in December, while housing inflation stood at 8.33 percent from 8.25 percent in the previous month.
The central bank has raised its inflation forecast to 5.1 percent for the January-March quarter, compared with 4.6 percent for October-December, citing price pressures from higher import taxes announced in the budget on Feb. 1, pushing up food and fuel prices.
India's retail inflation is seen accelerating, especially after a budget increase in some import taxes and the widening of the fiscal deficit for the year beginning April 1 to finance a sharp rise in spending on rural areas and health-care.
The central bank expects retail inflation to pick up to 5.1-5.6 percent in April-September before easing, assuming normal rainfall.
It will next review policy on April 5.