India's main inflation indicator measured in terms of the Wholesale Price Index (WPI) was at 7.31 percent in the corresponding month of last year and 6.16 percent in December 2013.
Food inflation eased to 8.8 percent in January from a high of 13.68 percent in the previous month, according to data released by the ministry of commerce and industry here.
Vegetable prices that surged by 57.33 percent year-on-year in December posted a slower increase of 16.6 percent in January.
Onions became costlier by 6.59 percent in January after jumping by 39.56 percent in the previous month year-on-year.
Potato price jumped by 21.73 percent, cereals became costlier by 9.27 percent, fruits became dearer by 5.32 percent and milk price rose by 7.22 percent during the month under review.
However, pulses became cheaper by 6.10 percent.
Inflation in manufactured products eased to 2.76 percent and fuel and power inflation dropped to 10.03 percent during the month under review.
The government has kept November WPI inflation data unchanged at 7.52 percent.
According to data released by the Central Statistics Office (CSO) earlier this week, India's retail inflation based on the Consumer Price Index (CPI) declined to 8.79 percent in January, the lowest level in two years.
Softening in both wholesale and retail inflation would give relief to the economic policymakers, who have been struggling to contain the price rise.
The Reserve Bank of India (RBI) last month hiked key policy interest rates by 0.25 percent to tame inflation.
"It is a good sign that the pace of inflation is finally coming down both at wholesale and retail level. We expect this trend to continue in the coming months giving more elbow room to the RBI for an accommodative interest rate policy," said Rana Kapoor, president of industry lobby Assocham.
Kapoor, who is also chairman Yes Bank, said the RBI must ease monetary policy to revive economic growth.
"An easy interest rate policy would not only create additional demand at the consumer level, it will also bring down substantially cost of borrowing for the industry," he said.