Consumer prices rose by an annual 3.81 percent last month, their fastest pace since October 2016, compared with February's 3.65 percent increase, the Ministry of Statistics data showed.
The Consumer Food Price Index (CFPI) combining Rural and Urban in the month of March dropped to 1.93% as against 2.01% in the month of February and 5.21% in March, 2016. Year-over-year growth in wages excluding bonuses fell to 1.9 per cent, from 2.2 per cent, dragging down the ex-bonus headline rate to 2.2 per cent, from 2.4 per cent.
Inflation was lower in December and January meaning that for the three months covered by the wage data, earnings growth was still just about higher than cost of living increases - but only by about 0.1%, the weakest since 2014.
A separate gauge of factory-gate prices known as the producer price index (PPI) 7.6% in the 12 months through March, matching forecasts. With inflation expected to reach three per cent later this year, economists fear consumer spending - the prime mover behind the nation's solid economic performance - could be adversely affected.
Nikhil Gupta, Madhurmi Chowdary analysts at Motilal Oswal had said, "It implies that CPI inflation averaged 4.6% in FY17 YTD (until February), as against 4.9% in the year-ago period".
Rising prices for food, alcohol and tobacco, clothing and footwear, miscellaneous goods and services were the main drivers behind the surge in consumer prices, which is above the Bank of England's target of 2 percent for the second month in a row.
Unilever wanted Tesco to raise the price of Marmite to offset an increase in inflation but the supermarket didn't want to deter its customers.
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The NBS said that mining inflation cooled to a still-brisk 33.7% over the year, down from 36.1% in February, while raw materials prices grew by 14.9%, below the 15.5% level reported previously.
"The CPI also will be boosted over the next two months by further utility price rises".
Unemployment has fallen to its lowest in a decade as a record number of job vacancies are on offer, new figures show.
The RBI also kept policy lending rate unchanged at its April policy review but hiked the reverse repo to suck out extra cash from banks.
However, Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: "Households are being caught in a flawless storm of rising inflation and slowing labour income growth".
The number of people in work increased by 39,000, taking the employment rate to 74.6 percent, a joint record high.
Sterling slipped back after the CPI announcement, before regaining composure in afternoon trading to rise 0.1% against the USA dollar at 1.243 and push marginally higher versus the euro at 1.172. Prices of housing water, electricity, gas and other fuels rose by 2.5 per cent, while cost of transport inched up 8.9 per cent.