India's main inflation rate has fallen to the lowest level in more than two years.
The report for January showed that wholesale prices rose at an annual rate of 6.55%, down from 7.47% in December.
Falling food prices have helped to ease the overall inflation rate and economists say the central bank now has greater scope to lower the cost of borrowing.
India's inflation rate remains higher than other leading emerging economies.
"The biggest factor for inflation coming down seems to be lower contribution from food commodities because of the bumper crop." said Deven Choksey, Managing Director at KR Choksey Shares and Securities in Mumbai.
"We expect inflation to remain at moderate levels in the near future, and if it settles around 6%, it will be a happy situation."
Sluggish economic growth has raised the prospect of a cut in interest rates by India's Central Bank.
"It gives more room to the Reserve Bank of India to go ahead with its interest rate cut." said Ashutosh Khajuria from Mumbai's Federal Bank.
"There is now an opportunity for the RBI to start its growth-biased monetary policy. Rate cuts could happen before March 31."