Inflation declined to around 14-month low of 4.03% for the week ended June 16, as essential food items and some manufactured products turned cheaper, easing pressure on RBI to further increase interest rates. The market expected 4.13%.

The wholesale prices-based inflation rate fell for the 10th consecutive week from the previous week level of 4.28%. Inflation also fell due to some base effect as it stood at high of 5.5% during the corresponding week
last year.

Earlier in the week, Finance Minister P Chidambaram had said in London that central bank tight monetary policy and rupee appreciation had helped to moderate inflation and more rate rises may not be needed if the trend continues.

Chidambaram wants to contain inflation without hurting economic growth, which he says is the antidote to poverty. India's central bank has raised benchmark rates nine times since October 2004 to damp consumer demand and may now rely on the delayed effect of raising borrowing costs to a five-year high to rein in inflation.

A pause in the Reserve Bank of India's policy of raising interest rates will help bolster economic growth. India's industrial production grew 13.6% in April, the government said on June 12. India's economy has averaged 8.6% growth since 2003, the second-fastest after China among the major economies, causing demand for manufactured and farm goods to outstrip supply and stoking prices.

Inflation is at its lowest since the week ending April 29 last year, when the rate was at 3.9%, according to data compiled by Bloomberg. It accelerated to 4.37% in the following week. To check prices of food grains, which have risen at almost twice the pace of manufactured product costs in the past year, the government removed the import duty on lentils in June 2006, and on wheat in September.