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India's finance minister on Friday said taming inflation was a priority, and that hiking interest rates was not the only tool available.

"Obsession to use interest rates as the only tool to deal with inflation and not manage the supply side factors will not give a complete solution," Nirmala Sitharaman said.

Annual retail inflation in July rose to its highest in 15 months as vegetable and cereals prices skyrocketed, beating all market expectations and putting pressure on the government to take action.

The Asian country has taken a number of steps including increasing supplies of tomatoes and onions, through its distribution network, while releasing stocks of wheat and sugar into the market to cool prices.

But food prices are likely to remain elevated in coming months as August has been uncharacteristically arid impacting prices of cereals, vegetables, sugar, spices, meat and dairy products.

Earlier this month, The Reserve Bank of India held its key lending rate steady but moved to reduce the amount of cash in the banking system as inflation concerns resurfaced.

"Central banks will have to keep in mind growth and growth related priorities along with controlling inflation," Sitharaman said, adding elevated interest rates can come in the way of economic recovery.