Dec. 7 (Bloomberg) -- India's inflation unexpectedly eased in the third week of November as increased farm production boosted by monsoon rains helped contain food prices.

Wholesale prices rose 3.01 percent in the week ended Nov. 24 from a year earlier, slower than the previous week's 3.21 percent gain, the Ministry of Commerce and Industry said today in New Delhi. Analysts had forecast inflation at 3.22 percent.

Slower inflation may be temporary, with the prospect of rising prices in the months ahead likely to prompt the central bank to consider further interest-rate rises. The Reserve Bank of India this week said food costs continue to put pressure on inflation and increasing production of wheat, rice and other commodities is vital for ensuring price stability.

``The main risks stems from ongoing increases in food and oil prices spilling over into inflationary expectations,'' the Paris-based Organization for Economic Cooperation and Development said in a report yesterday.

Inflation in India has held below the central bank's 5 percent target for five months as better rains this year increased farm production.

India received 5 percent more rain in the June-September monsoon season than forecast by the state-owned weather bureau, improving food production. The four-month rainy season is the main source of irrigation for the country's farms.

The monsoon is crucial to the health of India's $906 billion economy. A bigger harvest can help increase incomes among the 700 million Indians who live in villages, spurring demand for appliances and other consumer products.

Rice, Soybeans

Food Corp. of India, the nation's largest buyer of food grains, expects to gather 9 percent more rice from farmers in Sthe year to March because of a bigger crop, helping bolster state reserves of the grain.

The moderation in the rate of inflation was due to improvements in the supply of commodities, including wheat and sugar, and the strengthening of the rupee, which led to a decline in the prices of imported goods, India's ministry of finance said in a report presented to parliament today.

Output of oilseeds, including peanut and soybeans, may rise to as much as 16.83 million tons from 13.45 million tons a year ago, as above normal rains boosts planting in the nation, according to the Central Organization for Oil Industry & Trade, India's biggest grouping of oilseeds processors.

Indian policy makers have succeeded in bringing down inflation that reached a more than two-year high in January as the government capped retail prices of gasoline and diesel to protect consumers from near record-high oil costs.

Gasoline, Diesel

Prime Minister Manmohan Singh's government caps gasoline and diesel rates to help keep inflation down and protect the poor, who make up half the country's 1.1 billion people. Cooking gas prices haven't been raised since November 2004 and kerosene since April 2002.

India's central bank on Oct. 30 unexpectedly ordered lenders to set aside more reserves for the fourth time this year to contain inflation. Reserve Bank Governor Yaga Venugopal Reddy reiterated the bank aims to contain inflation below 5 percent by March 31.

India today revised the inflation rate for the week ended Sept. 29 to 3.36 percent from 3.26 percent. The government revises the figure after a delay of two months on additional price data.

                       Week Ended   Week Ended   Percentage
                        Nov. 24       Nov. 17       Change

Primary articles         222.7         224.3         -0.7
Fuel, power              326.1         326.1         unchanged
Manufactured products    188.2         188.1          0.1
Food articles            221.8         224.2         -1.1
Vegetables               205.5         227.3         -9.6
Food products            192.0         191.6          0.2
Edible oils              176.0         175.2          0.5
Cement                   219.7         219.7          unchanged
Total                    215.4         215.7         -0.1

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.

Last Updated: December 7, 2007 04:56 EST