Declining price of vegetables pulled down inflation to over three-year low of 5.96 per cent in March, which may prompt the Reserve Bank to consider a rate cut in its annual monetary policy next month.
Inflation based on the Wholesale Price Index (WPI) stood at 6.84 per cent in February. In March, 2012, it was 7.69 per cent.
The 5.96 per cent March-end inflation is much lower than Reserve Bank's projection of 6.8 per cent.
The decline in inflation and a slowdown in industrial output growth to 0.6 per cent in February has raised expectations of a rate cut by RBI next month to boost growth.
The RBI will announce its annual monetary policy on May 3.
As per official data released today, inflation in the manufactured items category witnessed a marginal decline at 4.07 per cent in March. It was 4.51 per cent in February.
Inflation in food articles category, which has a 14.34 per cent share in the WPI basket, too declined to 8.73 per cent.
Inflation in this category was at 11.38 per cent in February.
The easing in food inflation was helped by a sharp drop in prices of vegetables. Inflation in vegetables stood (-)0.95 per cent in March, from 12.11 per cent in the previous month.
The rate of price rise in onion stood at 94.85 per cent for the month of March, as against the inflation rate of 154.33 per cent in February.
Inflation in rice eased to 17.90 per cent in March, as against 18.84 per cent in the previous month.
Inflation for January was revised upwards to 7.31 per cent, from 6.62 per cent as per provisional estimates. Commenting on the inflation numbers, Planning Commission Deputy Chairman Montek Singh Ahluwalia said inflationary pressure in coming down gradually.
"Inflation behaviour is consistent with what government has been saying that it is slowly coming under control," Ahluwalia said.
As per the latest data, inflation rate in wheat and cereals eased to 19.87 per cent and 18.36 per cent, respectively, in March.
Potato and pulses prices declined to 20.06 per cent and 10.51 per cent in March.
While the inflation rate in egg, meat and fish category stood at 11.03 per cent, for milk it was 4.42 per cent. Inflation in fruits came down to 4.71 per cent.
For the fuel and power category, it was up by 10.18 per cent in March, compared to 10.47 per cent in February 2013.