The correct answer is option 3, which states that both statement 1 and statement 2 are correct.

Statement 1 says that inflation in India continued to be moderate during 2017-18. This means that the overall increase in prices of goods and services in India was not excessive or high during that period. In simple terms, prices were not increasing at a very fast rate.

Statement 2 says that there was a significant reduction in food inflation, particularly in the prices of pulses and vegetables, during the same period. This means that the rate at which prices of food items, especially pulses and vegetables, were increasing became lower. In other words, the prices of pulses and vegetables were not rising as much as they were before.

By combining statement 1 and statement 2, we can conclude that inflation in India during 2017-18 was moderate and there was a significant reduction in food inflation, particularly in the prices of pulses and vegetables.