Retail inflation eased to a three-month low at 9.87 per cent in December, thanks to moderation in vegetable prices.
This has raised hopes that the Reserve Bank of India may leave key rates untouched at its policy review meeting this month-end.
In recent months, the RBI has indicated that it may look at the consumer price index-based inflation as a gauge for inflation management.
Currently, the central bank is largely guided by the movements in the wholesale price index.
Consumer price index-based inflation for November 2013 now stands revised downward to 11.16 per cent from 11.24 per cent earlier, official data released on Monday showed.
The moderation in retail inflation in December 2013 came on the back of softening of food price rise to 12.16 per cent from 14.72 per cent in November 2013.
In December, retail inflation moderated both in rural and urban areas.
While the consumer price index-based inflation in rural areas stood at 10.49 per cent (11.66 per cent in November), in urban areas it stood at 9.11 per cent (10.53 per cent).