New Delhi (Agencies): Driven by declining prices of sugar and wheat, the overall inflation eased marginally to 8.23 per cent in January even as the prices of vegetables and fruits continued to remain firm.

Encouraged by the 0.20 percentage point fall in inflation over 8.43 per cent in December, Finance Minister Pranab Mukherjee said it would come down to 7 per cent by the end of the fiscal.

Experts, however, feel that inflation is still above the Reserve Bank's comfort level of 5-6 per cent and the central bank may further raise the key policy interest rates in its mid-quarterly review on March 17.

According to the inflation data for January based on movement in the wholesale prices, sugar became cheaper by 14.99 per cent followed by pulses (12.78 per cent), wheat (4.94 per cent) and potato (1.21 per cent) on a year on year period.

The declining inflation, however, will not bring much relief to the common man as prices of several essential kitchen items including vegetables, fruits and milk have continued to remain firm.

Vegetable prices rose by 65 per cent, and onion prices nearly doubled. Also, fruits became costlier by 15.01 per cent and egg, meat and fish by 15.09 per cent.

"I am hoping that it (inflation) would be roughly around 7 per cent (by March end)," Mukherjee said, adding the inflation numbers in the coming months would depend on global developments and the way the commodity prices including crude oil move in the global markets.

Prices of "fuel and power" shot up by 11.41 per cent, with petrol rising 27.37 per cent on an year-on-year basis.

These items may become more expensive, once domestic prices are raised in line with the rising crude oil prices in the international market.

Crude oil prices have surpassed USD 100 per barrel, the highest in the past two years.

India has been fighting a stubbornly high inflation, which has remained above 8 per cent since January 2010.

The inflation figure for November stands revised up to 8.08 per cent, from initial estimates of 7.48 per cent.

To fight inflation, which is above the comfort level of 4-5 per cent, the Reserve Bank has hiked key policy rates seven times since March 2010.

Experts said the Reserve Bank would continue with its tight monetary policy and may go for another rate hike in the coming months.

Prime Minister's Economic Advisory Council Chairman C Rangarajan said, "RBI will have to take a view looking at level of inflation. It is still at an uncomfortably high level. Some action, continued action, by the RBI (to tighten monetary policy) may be required."

Economists too concurred with PMEAC's view and said another round of 25 basis points hike is on the anvil.

"We believe the RBI will continue with its monetary tightening policy and can expect a hike of 25 basis points in the short-term lending and borrowing rates. We may see a rate hike in March," Crisil Chief Economist D K Joshi said.

Both Rangarajan and Joshi feel the 7 per cent inflation target set by the Finance Minister is achievable.

Overall, primary articles group became costly by 17.28 per cent, with food articles rising 15.65 per cent.

In the non-food articles category, fibre prices rose by 48 per cent on an annual basis.

The easing of inflation is expected to be a morale booster to the government which has been under pressure due to high prices of food items in recent months.

It also shows that Reserve Bank of India's action by raising rates seven times since March 2010 has started showing some results.

It may be recalled, the food inflation, which accounts for over 14 per cent in the overall Wholesale Price Index (WPI) inflation, has remained high since December, scaling up to 18.32 per cent.

Prime Minister's Economic Advisory Council Chairman C Rangarajan said, "RBI will have to take a view looking at level of inflation. It is still at an uncomfortably high level. Some action, continued action, by the RBI (to tighten monetary policy) may be required."

Economists too concurred with PMEAC's view and said another round of 25 basis points hike is on the anvil.

"We believe the RBI will continue with its monetary tightening policy and can expect a hike of 25 basis points in the short-term lending and borrowing rates. We may see a rate hike in March," Crisil Chief Economist D K Joshi said.

Both Rangarajan and Joshi feel the 7 per cent inflation target set by the Finance Minister is achievable.

Overall, primary articles group became costly by 17.28 per cent, with food articles rising 15.65 per cent.

In the non-food articles category, fibre prices rose by 48 per cent on an annual basis.

The easing of inflation is expected to be a morale booster to the government which has been under pressure due to high prices of food items in recent months.

It also shows that Reserve Bank of India's action by raising rates seven times since March 2010 has started showing some results.

It may be recalled, the food inflation, which accounts for over 14 per cent in the overall Wholesale Price Index (WPI) inflation, has remained high since December, scaling up to 18.32 per cent.