The headline inflation, which is measured through wholesale price index (WPI) increased to 8.98 % in March from 8.31% February. This has been due to higher fuel, food and manufacturing costs.
The figure was more than 69 basis points more than the expectations at 8.30 %. This is among the highest in the economies of Asia-Pacific region.
The inflation data in both the Asian giants - China and India - were released on the same day. The world's second largest economy, China, revealed that inflation had gone up to a 32-month high.
The central bank has raised its policy rates on eight different occasions since March 2010, making it one of the most hawkish central bank in Asia.
Inflation has been the biggest headache for all the Congress-led government which is under pressure for the string of corruption scandals that had hit the media light. With elections coming up in three states, the topic can hit the ruling government. Increased cost of living has become a base doe the household.
Data from the ministry of commerce showed that fuel and power prices climbed 12.92 percent, food rose 9.47 percent and manufactured goods climbed 6.21 percent.
This high inflation has led many economists to opine that the RBI will likely hike rates, again at its next meeting on May 3, even though recent data shows industrial output slowing due to monetary tightening.
Economists think that inflation in food and oil has now spilled over into the general economy, pushing up wages and other costs.
Other Asian economies including China, South Korea, Taiwan and Indonesia are also battling inflationary pressures with crude oil hoovering above USD 100 and other commodities rising.
China's inflation hit 5.4% year-on-year in March, its highest since July 2008, suggesting Beijing's efforts to rein in soaring costs are still falling short.