Retail inflation, measured by Consumer Price Index, worsened to 7.59 per cent in January, government data showed. The inflation remained above the Reserve Bank of India's medium-term target of 4 per cent for a fourth month in a row, dashing hopes of further monetary easing at a time when economic growth has fallen to the lowest in more than six years.
The inflation in January was higher than Reuters poll of 7.40 per cent.
Food inflation eased to 13.63 per cent in January from 14.19 per cent in December.
The RBI, which cut interest rates by a cumulative 135 basis points last year, is now expected to keep interest rates on hold until late this year, putting the onus on the government to boost the flagging economy.
In separate data released by the government, factory output measured by the Index of Industrial Production, contracted 0.3 per cent in December; this was worse than analysts' estimates. Analysts polled by Reuters had forecast industrial output to rise 1.8 per cent.
Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, said, " The sharp spike in food inflation has led January CPI to breach a six-year high of 7.59 per cent compared to 7.35 per cent seen in December. It is the consecutive second month, that CPI has breached the upper band of RBI's inflation target. IIP has unexpectedly contracted to 0.3 per cent in December from 1.8 per cent in November. Due to higher inflation, RBI has been maintaining a status quo since December 2019. If inflation continues to hover above 6 per cent, we don't expect RBI to cut interest rate or change its accommodative policy stance."