India's inflation cooled to a more than three-year low in May, data showed Friday, but the rupee's plunge will likely stall any interest rate cut to kickstart the ailing economy.

The Wholesale Price Index, India's most most closely watched inflation gauge, dropped to 4.7 percent in May on an annual basis, down nearly two-tenths of a percentage point from its 4.89 percent level in April.

The broadly based wholesale price inflation reading, the lowest since late 2009, was well below market forecasts of a 4.9 percent rise.

It was also inside the central bank's so-called 5.0 percent "comfort zone", even though the narrower-based retail inflation measure is double the level near 10 percent.

But the Indian currency's slide to a lifetime low of 58.98 rupees to the dollar earlier in the week has sparked fears inflation could resurge as a key problem in India, which buys 80 percent of its crude oil from abroad.

"We doubt this (inflation fall) will persuade the central bank to cut the repo rate," said Credit Suisse economist Robert Prior-Wandesforde, citing a combination of rupee's weakness, high retail price inflation and expected poor trade data.

The rupee was at 57.80 to the dollar after ceding early gains on fresh selling pressure.

The weak state of the rupee, which three months ago was at 45.80, was expected to prompt the bank to keep its lending rate on hold at 7.25 percent at its Monday meeting as lower rates could translate into an even weaker currency.

India vitally needs foreign currency as it imports more than it exports and has a ballooning current account deficit - the broadest measure of trade.

Finance Minister P. Chidambaram announced plans Thursday to further liberalise India's still heavily state-controlled economy to draw more foreign capital and shore up the rupee.

The bank has cut its main lending rate three times since the start of 2013 to spur an economy growing at a decade-low of five percent.

Meanwhile, March inflation was revised down Friday to 5.65 percent from an earlier 5.96 percent while industrial output growth for April was raised to 2.2 percent from a previously announced two percent.

India's Central Statistics Office has a history of making frequent revisions, which analysts in the past have said raises doubts about the reliability of its data.

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