India's headline inflation eased to 7.25% in June compared to 9.51% a year ago, raising hopes that the Reserve Bank of India would cut interest rates in its monetary policy on July 31.
The drop in inflation is primarily due to the decline in prices of several non-food and fuel items.
However, high food prices at 10.81% in June, continued to be a headache for policymakers.
A below-normal monsoon could hit food production thereby putting further pressure on prices.
The finance ministry said that the declining trend would continue.
"Availability of food articles is expected to increase and this will address supply constraints," said Namo Narain Meena, minister of state for finance.