India's inflation has jumped half a percentage point to top six percent, its highest level in two years, as prices of food and fuel climbed, data has shown, stoking expectations of another interest rate rise.

Inflation measured by the wholesale price index -- the most closely watched cost-of-living monitor -- hit 6.12 percent for the week ended January 6 from 5.58 percent the previous week and 3.86 percent for the same week a year earlier.

The inflation rate in Asia's fourth-largest economy was the highest since December 2004 when it stood at 6.56 percent.

Prices of such staples as fruits, vegetables, maize and wheat all rose as did costs of aviation turbine fuel and other energy supplies, according to the figures released Friday.

The rate was far above the 5.5 percent ceiling set by India's Reserve Bank of India, fuelling expectations that the central bank would tighten monetary policy again at its next meeting January 31.

"I see the reverse repo going up by 25 basis points," said D.K. Joshi, principle economist at Indian credit rating agency Crisil, referring to the rate paid for commercial bank deposits by the central bank.

Finance Minister P. Chidambaram said the inflation numbers were "a matter of concern" and his ministry was in touch with the Reserve Bank and the agriculture ministry.

"The government has found that items of daily use by the common man ... are causing concern," he told reporters. "We will watch the situation carefully and take whatever steps require to be taken."

The Congress-led government -- mindful that rising costs can be political dynamite among India's poor masses which helped propel it to power in 2004 -- has said "price stability is one of the highest priorities" but it is also keen to avoid any sharp monetary tightening that could choke growth.

"Inflation is a highly sensitive issue for the government," said T.K. Bhaumik, chief economist at India's largest private company Reliance Industries.

"I think you will see some change" in monetary policy and in distribution of goods, he said.

The government has said infrastructure bottlenecks are driving inflation. Three years of record eight percent-plus growth have strained India's dilapidated transportation networks and India's production capacity.

India's economy grew by 9.1 percent in the first half of the financial year while credit growth has been expanding by over 30 percent annually.

"They (the central bank) haven't stifled growth, they would like to engineer a soft landing so they will be reasonably accommodative for growth," Joshi said.

Since it began its tightening cycle in late 2004, the central bank has been using a variety of tools. In December it boosted the amount of money that banks must keep with the central bank, raising the cash reserve ratio by 50 basis points to 5.5 percent in a bid to suck out liquidity and tame credit growth.

It has also hiked in stages its reverse repurchase rate by 125 basis points to a four-year high of six percent and raised its short-term lending rate by 150 basis points to 7.25 percent.