The annual rate of inflation based on monthly wholesale price index (WPI) was 1.22 per cent in December as compared to 1.55 per cent in the previous month.
It was 2.76 per cent in December 2019.
The decline last month was mainly due to lower increase in food prices, data released by the Ministry of Commerce and Industry showed on Thursday.
The food inflation for December dropped to 0.92 per cent as compared to 4.27 per cent in the previous month.
"The food index consisting food articles from primary articles group and food product from manufactured products group has decreased from 158.9 in November 2020 to 154.4 in December 2020," said an official statement.
The primary articles inflation was at minus 1.61 per cent versus 2.72 per cent month-on-month and manufactured products inflation at 4.24 per cent versus 2.97 per cent.
For manufactured products with a weightage of 64.23 per cent, the index increased by 1.4 per cent to 123 in December from 121.3 in November.
A total of 16 groups that witnessed an increase in prices are manufacture of furniture; other transport equipment; motor vehicles, trailers and semi-trailers; machinery and equipment; electrical equipment; computer, electronic and optical products; fabricated metal products except machinery and equipment; basic metals; other non-metallic mineral products; rubber and plastics products; chemicals and chemical products; printing and reproduction of recorded media; paper and paper products; textiles; tobacco products; and food products.
Photograph: Amit Dave/Reuters