India's headline inflation rose 6.9 percent in March, faster than expected because of rising food prices, government data showed Monday.
The number makes it harder for the central bank to cut interest rates, despite flagging growth in Asia's third-largest economy.
"The good news is that core inflation has come down to a two-year low of 4.6 percent," said Samiran Chakraborty, head of research at Standard Chartered in Mumbai. "The bad news is that possibly there are still incipient inflation pressures which could show up in the next three months or so."
Freight rates and excise duties went up in March, he said, and high global oil prices are putting pressure on the government to hike regulated prices of petrol and diesel.
Chakraborty said he expects the Reserve Bank of India to cut rates by a quarter of a point when it meets Tuesday, but lingering inflation may make it harder for the bank to signal that it has taken a decisive turn to support growth with a string of interest rate cuts going forward.
The Reserve Bank of India hiked rates 13 times between March 2010 and October 2011 in an effort to tame India's near double-digit inflation.
India's economy grew 6.1 percent in the December quarter, the slowest in over two years.
The government also revised upward January inflation to 6.89 percent, from an earlier estimate of 6.55 percent.