Preview: India's January inflation likely at more than 3-year low

"There could be a little bit of a potential uptick in food inflation on the back of some of the weather related factors we have had more recently," said Leif Eskesen, HSBC's chief economist for India and Southeast Asia.

The main concern is onion prices, the staple ingredient in Indian cuisine, which have more than doubled in the last three months as supplies remained tight.

India's 1.2 billion inhabitants chomp their way through 15 million tonnes of onions a year, using them as the base for most traditional curries, and when prices rise it gives a significant kick to inflation.

While food prices have kept headline inflation high, core inflation - non-food items and manufacturing - extended its downward trend and dropped to 4.2 percent in December.

The government, which fixes the retail price of diesel, last month told retailers to raise the price of the subsidised fuel in small amounts every month, a move aimed at propping up public finances.

"We wont necessarily see much of the impact from the hike in diesel prices because it was relatively limited and also towards the middle of the month but there could be some slight uptick in energy related prices," Eskesen said.

India is the world's fourth biggest oil importer.

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