Rising for the fifth straight month, retail inflation or CPI quickened to 5.61 per cent in December, mainly on costlier vegetables and cereals, limiting the headroom for the Reserve Bank to lower rate next month.
Food inflation too rose to 6.40 per cent during the month, government data released on Tuesday showed.
Retail inflation measured by the consumer price index (CPI) was at 5.41 per cent in November 2015 and 4.28 per cent in December 2014.
Retail prices of cereals and products moved up by 2.12 per cent in December, from 1.7 per cent in November.
The growth in prices in meat and fish stood out at 6.57 per cent as against 5.34 per cent in November while that of eggs was at 0.97 per cent, from 0.5 per cent in the previous month.
The prices of protein-rich items such as meat, fish and eggs generally go up during the winter as demand spikes.
However, seasonal fruits turned cheaper in December, with inflation print at 0.64 per cent although vegetables prices grew 4.63 per cent.
Pulses continue to pose a big challenge for policymakers as the rate of price growth stood at 45.92 per cent, only marginally down from 46.08 per cent in November.
Retail inflation in the oil and fats category moved up to 7.06 per cent while that of fuel and light, it was 5.45 per cent.
"We are not surprised as this is a very sticky consumer inflation, but is well within the RBI target of 6 per cent. Once the base effect comes into play, I see a downward trend in CPI and a very strong case for interest rates coming down," Yes Bank CEO and MD Rana Kapoor told reporters here.
The Reserve Bank keeps track of retail inflation to decide on its bi-monthly monetary policy. The next meet is due on February 2.
The apex bank has been targeting 6 per cent inflation target by January 2016.
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"On the prices front, situation has marginally
deteriorated as CPI for January 2016 came in at 5.7 per cent as compared to 5.6 per cent in December 2015. Like earlier months, the key driver of CPI inflation once again had been food inflation.
"As the data show deterioration, the macroeconomic management of the economy by the government as well as RBI is going to be more difficult ahead, particularly when Union Budget is due by the end of this month," said Sunil Kumar Sinha, Principal Economist, India Ratings and Research.
