Year-on-year wholesale price inflation, India's main cost-of-living measure, edged up to 9.9 percent in March from 9.89 percent the previous month, according to commerce ministry figures.
Inflation is riding at a 17-month high and is seen in danger of climbing as demand pressures mount in the country of 1.2 billion people as the economy shakes off the effects of the global financial crisis.
The inflation increase was smaller than financial markets expected, thanks partly to a drop in prices of such staples as sugar and pulses and a decline in fuel costs.
But economists forecast the March inflation figure would be revised higher later and said they still expected the Reserve Bank of India to increase short-term lending rates at its policy meeting next Tuesday.
With some firms, such as India's largest passenger car company Maruti Suzuki, operating at full capacity to meet rising consumer demand, the bank has said it wants to keep a lid on inflationary pressures.
Last month,