Inflation based on wholesale prices shot up to 39-month high of 6.55 per cent in February on the back of costlier petrol, diesel and LPG and food goods such as sugar, fruits and cereals.
Retail inflation also rose to 4-month high of 3.65 per cent in February mainly due to surge in price of food items like fruits, sugar and confectionery.
The increase in inflation will now make it more difficult for the RBI to switch to an easy money policy to spur economic growth in a slowing economy through lower interest rates.
Measured in terms of Consumer Price Index (CPI), the inflation had dipped to a multi-year low of 3.17 per cent in January this year on account of cash crunch following demonetisation. It was 5.26 per cent in February last year.
According to the CPI data released on Tuesday by the Central Statistics Office (CSO), the consumer food prices index (CFPI) rose by 2.01 per cent in February from 0.61 per cent in January. The CFPI was 5.3 per cent in February 2016.
Inflation in fruits was higher at 8.33 per cent, fuel and light at 3.9 per cent in February. The rate of price rise in meat and fish was 3.5 per cent in February.
Prices of sugar and confectionery items rose by 18.83 per cent in February while inflation in milk and milk product increased by 4.22 per cent.
The rate of inflation in household goods and services was 4.09 per cent while this rate was in health segment was 4 per cent. The transport and communication became expensive by 5.39 per cent.
The personal care and effects segment rose by 5.15 per cent while the education became more expensive by 5.37 per cent in February this year.
The inflation rate was 4.38 per cent in clothing and footware segment while it was 4.9 per cent in housing segment.
However, the prices of vegetables and pulses declined by 8.29 per cent and 9.02 per cent respectively.
Rural retail inflation was at 3.67 per cent in February compared with 3.36 per cent in the preceding month. The CPI was also up in the urban sector at 3.55 per cent in February, from 2.9 per cent in January this year.
(With inputs from PTI)