Food inflation eased by over one percentage point to a month's low of 16.61 per cent for the week ended April 17, as pressure on prices declined with the arrival of rabi crops in the markets.

However, the fall in food inflation does not call for any celebration as the price pressure will remain till June with inflation spreading to manufactured items, economists warn.

Besides rabi crops, the government is pinning its hopes on reports of normal monsoon for further decline in food prices.

Reports of normal monsoon this year has also calmed aggressive speculative activities, analysts said.

Earlier this month, the Indian Meteorological Department (IMD) had forecast a normal monsoon across the country.

Over the week, inflation declined from 17.65 per cent as prices of masur, jowar, fruits and vegetables fell by 2 per cent and that of wheat by 1 per cent. However, moong, urad and fish-inland became costlier.

"Fall in food inflation is on expected lines. The supply situation is easing. The government, too, has indicated of a declining food inflation...both with the arrival of rabi and on expectation of good monsoon. We see food prices to moderate considerably," said Abheek Barua, chief economist, HDFC Bank.

On an annual basis, potatoes saw a significant fall of 28 per cent in prices on glut in supplies in various parts of the country and onions became cheaper by 10 per cent.

However, pulses remained expensive by about 30 per cent, milk by 22 per cent and fruits by about 10 per cent over the last year.

The government expects prices of essential items to fall further on prediction of a normal monsoon.

"The outlook is further brightened by the fact that a normal monsoon is predicted this year...Indications of softening of food inflation are clearly visible...It is expected that this decline will continue in the coming months uninterruptedly," Finance Minister Pranab Mukherjee said yesterday.

Though food prices have started easing, overall inflation is on the rise with inflation spreading to non-food segments.

The wholesale price-based inflation in March was 9.9 per cent, much higher than RBI's March-end projection of 8.5 per cent.

"The problem is non-food inflation. The manufactured product inflation is picking up. As of now, there is no case for euphoria," said Barua.

He expects April inflation to be 9.5 per cent.

"Inflation will be peaking in June when it will be 9.7 per cent and thereafter it will start declining and would come down to 5.5 per cent by the fiscal end," Barua added.

The Reserve Bank, too, expects overall inflation to come down to 5.5 per cent by March 2011.

To contain rising inflation, the central bank, in its April 20 monetary policy for 2010-11, had hiked its key short-term lending and borrowing rates and the ratio of money banks mandatorily park with the RBI by 25 basis points each.