Food inflation fell to its lowest level in 20 months at 7.33% for the week ended July 16 on the back of cheaper pulses, even as other items grew more expensive.
Food inflation, as measured by Wholesale Price Index (WPI), stood at 7.58% in the previous week.
The decline could also be attributed to the high inflation figure of 18.56% for the corresponding year-ago period, a phenomenon dubbed the 'high base effect' in economic parlance.
The latest figure is the lowest since separate data for food inflation was first released in November, 2009.
During the week under review, prices of pulses fell by 8% year-on-year. However, prices of other items went up.
Onions became more expensive by 22.66% and fruits became 13.90% dearer on an annual basis.
Potatoes became 10.55% costlier, while milk was up 9.96%. Vegetable prices were up by 7.59% year-on-year.
Overall, primary articles recorded inflation of 10.49% for the week ended July 16, down from 11.13% in the previous week. Primary articles have a share of over 20% in the WPI.
However, inflation of non-food articles went up to 16.05% from 15.50% in the previous week.
Furthermore, fibres became more expensive by over 28% and oil seeds were up 13.72%. Minerals became dearer by 23.12% year-on-year.
Meanwhile, the index for fuel and power stood at 12.12%.
The moderation in food inflation is expected to come as a relief for the government and the Reserve Bank, who have adopted a series of measures for battling inflationary pressure.
Headline inflation stood at 9.44% in June. The RBI has already hiked interest rates 11 times since March, 2010, to tame demand and curb inflation.
In its quarterly review earlier this week, the RBI raised its overall inflation projection for March, 2012, to 7% from 6% estimated earlier, "in view of the domestic demand-supply balance, global trends in commodity prices and the likely demand scenario."