India's inflation rate surges to 11.89 percent, industry growth declines to 6-year low of 3.8 percent

Consumer durables also showed a positive growth of 4.4 percent in May, compared to a decline of 0.7 percent a year earlier.

"The slowdown is across the board with both consumer and capital goods much weaker than expected," said Sonal Varma, economist at Lehman Brothers in Mumbai.

"Slowing growth and rising inflation adds to the monetary policy dilemma," Varma said, adding, "The momentum in inflation continues to accelerate and that is a worrying sign. With rising input costs, there is a lot of pressure on producers to increase output prices."

Varma said she expected the central bank to raise its key lending rate from 8.5 percent later in July.

Unlike the consumer price index, which is published monthly, the widely watched wholesale price index covers greater number of products in its computation and is published weekly.

Reacting to the new inflation data, the Finance Ministry urged the people to remain calm as fiscal and monetary measures taken by the government and the central bank would take some time to take effect. A statement issued by the Finance Ministry said in spite of surging inflation, the data showed that prices of some essential commodities had stabilized and the prices of 12 articles in the primary articles group had in fact declined from the previous week.