Providing the much-needed relief to the government that is battling economic slowdown, inflation nearly halved to 6.61 per cent from a peak of 12.91 per cent four months ago, but the Finance Ministry said prices of primary articles are still too high for comfort.

A 0.23 percentage point fall in inflation for the week ended December 13 gives more room to the Reserve Bank of India to signal a further cut in interest rates, as was advocated by the Mid-Year Review of the economy in case manufacturing continued to be hit by global developments.

Even as inflation fell for the seventh straight week, food inflation rose to 10.46 per cent from 10.19 per cent during the week. In fact, primary category, comprising non-processed food and raw items, continued to be expensive.

The Finance Ministry in a statement said, "Prices of primary articles continue to rule high, despite the decline in overall inflation."

Analysts expect that falling commodity prices and slackening demand globally may further bring down inflation in the range of 2-3 per cent by March 2009.

"I expect Inflation to drop sharply to below 2 per cent by March... decline in manufactured goods prices and  commodity prices," HDFC Bank Chief Economist Abheek Barua said.

During the week, manufactured products became cheaper with basic heavy inorganic chemicals turning less expensive by 7.2 per cent. Also groundnut oil, sugar, cement and certain textile items like cotton yarn were cheaper.

Among food items, vegetable prices fell by more than three per cent followed by tea, cereals, spices while sea fish, wheat and bajra got dearer.

Food items which became expensive were pulses, other cereals, brinjal and cabbage.