Retail sales in December, meanwhile, showed a 5.4% rise compared to a year ago - down from 5.8% - and 0.4% month-on-month, in line with expectations, from 0.8% in the previous month.
Based on the Consumer Price Index (CPI), retail inflation, which was at 4.88 per cent in November and 3.41 per cent in December 2016, surged to 5.2 per cent - a level well past RBI's comfort. The reports probably will keep the Federal Reserve on course to increase interest rates in March and raise the prospects of a more aggressive monetary policy tightening this year.
India's consumer price index (CPI) or retail inflation stood at 5.21% in the month of December 2017 - higher from 4.88% in November 2017 and 3.41% in the similar month of previous year.
Weak import and producer price reports this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI data. The so-called core PPI increased 0.4 percent in November.
Still, inflationary pressures have a lot of support here that could push prices higher into 2018.
A closely-watched measure known as "core" sales - which excludes autos - increased 0.4 percent in the month, and posted a gain of 4.3 for the full year, which was the biggest increase since 2011. It increased 1.8 per cent in the 12 months through December, picking up from 1.7 per cent in November.
Annually, the report said, headline inflation rose 2.1%, slightly down from November's reading of 2.2%.
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Miles Eakers, chief market analyst at Centtrip, said: "Inflationary pressure remains stubbornly below the Fed's target of 2%". The December increase was driven by a 2.7% decline in gasoline prices.
"The uptrend seen in food inflation in recent months appears to have sustained in December", said Abhishek Upadhyay, economist at ICICI Securities PD.
But apparel prices fell for the fourth consecutive month, and airline fares fell 0.5 percent after a 2.4 percent drop in November. And in case, it crosses the danger mark of 6% in January, there could also be a possibility of the central bank increasing its interest rates in future.
Households also paid more for new motor vehicles, which rose 0.6 percent in price last month, the biggest gain since January. The cost of healthcare services increased 0.2 percent last month after being unchanged in November.
The 10-year breakeven rate ended marginally higher on the day at 2.02 percent in advance of next week's $13 billion of 10-year TIPS supply.
Reacting to the data, industry body CII said that November IIP numbers reflected "the economic revival taking place across sectors".