"Monetary measures related to liquidity management may remain subdued to accommodate large government borrowing," said Shubhada Rao, chief economist at Yes Bank.

On Monday, the government raised its fiscal deficit estimate to 6.8 per cent of gross domestic product in 2009/10, the biggest in 16 years, and planned record gross market borrowing of 4.51 trillion rupees ($93 billion), a quarter more than an initial estimate.

Despite the current negative readings, analysts said the WPI could end the 2009/10 (April/March) fiscal year at 4.5-5 per cent, above the central bank's estimate of 4 per cent.

The consumer price index, which assigns greater weightings to household items, rose an annual 8.63 per cent in May.

An increase in retail fuel prices, below-normal monsoon rains and subsequent worries of food supplies would keep the pressure on the overall price level.

"We have seen higher food prices exerting upward pressure on the overall index and to that extent monsoon remains a key wild card," said Gunjan Gulati, economist at JP Morgan Chase.

"The year-on-year number is expected to remain negative till late August or mid-September."