Official data on Monday showed that the consumer price index (CPI), or retail inflation, in December at 7.35 per cent rose to its highest in over 5 years. It was at 5.54 per cent in November 2019.
"Retail inflation rose to an over five-year high of 7.4 per cent in December 2019, significantly higher than CARE Ratings' estimate of 5.8 per cent," the rating agency said in a note.
Sharp rise in food prices was the chief cause of the hardening retail inflation.
In setting its monetary policy rates, the Reserve Bank of India has the declared median target of containing consumer inflation at 4 per cent with an outer limit of 6 per cent.
"CPI-based retail inflation shot up to a 67-month high of 7.4 per cent ..the number was way higher than our estimates of 6.5 per cent and consensus of 6.7 per cent," a report by brokerage firm Motilal Oswal said.
Rating agency ICRA said that "the CPI inflation in December 2019 exceeded our forecast (6.7 per cent), primarily on account of a higher-than-expected print for food and beverages".
The sharp uptick in the December CPI came on the back of a spike in vegetable prices. The year-on-year inflation for vegetables jumped to 60.5 per cent, from 36.1 per cent.
Owing to rising inflation, the RBI kept interest rates unchanged in December following five previous cuts totaling 135 basis points earlier in 2019. The central bank will make its next interest rate decision on February 6.
( With inputs from IANS )