The wholesale price inflation based on the wholesale price index (WPI) contracted further to (-) 4.95 per cent in August against (-) 4.05 per cent recorded in July.
WPI inflation stood at 3.85 per cent in August last year.
Build-up of inflation rate so far in the financial year was 0.34 per cent compared to a build-up rate of 3.11 per cent in the corresponding period of the previous year.
The fall in inflation rate was primarily on account of a sharp cooling in fuel costs, government data showed.
The wholesale fuel prices tumbled 16.50 per cent from a year ago, while food prices dropped 1.13 per cent year-on-year.
The index for the primary articles group, which has a weight of 20.12 per cent in the WPI, rose 1.7 per cent during August 2015.
Within the primary articles group, the index for the 'food articles' group rose 2.6 per cent due to higher price of fruits & vegetables, arhar, gram, urad, bajra, maize, masur, ragi, wheat, barley, condiments spices and pork. However, the price of poultry chicken, beef and buffalo meat and moong, tea and jowar declined.
The index for the 'non-food articles' group rose 0.8 per cent due to higher price of flowers, copra (coconut), fodder, niger seed, safflower (kardi seed), cotton seed, castor seed, groundnut seed, mesta, sunflower, rape and mustard seed. However, the price of raw silk, gaur seed, raw rubber, soyabean, gingelly seed (sesamum) and linseed and raw cotton declined.
Prices of manufactured goods declined 1.92 per cent on year last month.
The Reserve Bank of India is now primarily guided by consumer price index based inflation for its monetary policy actions.
The RBI is scheduled to meet on September 29 for its next monetary policy review.