The weekly wholesale price index was up 4.28 percent for the week ended June 9, a decline from 4.80 percent last week, the Indian ministry of commerce said.

The figure was sharply down from the 5.29 percent inflation rate reported for the same basket of goods a year ago.

With inflation under five percent for the third week in a row, pressure may ease off the central bank to announce a rate hike at its next review in July.

But with a higher than expected 13.6 percent gain in industrial output in April, the first growth-related data reported for the new financial year, India's finance minister said that inflation must still be watched closely.

"We must strike a balance between inflation and growth and I maintain that," P. Chidambaram told reporters in New Delhi.