BENGALURU, April 12 (Reuters) - India's retail inflation accelerated to near 7% year-on-year in March, its highest in 17 months and above the upper limit of the central bank's tolerance band for a third straight month, putting pressure on it to raise policy rates.

Annual consumer price-based inflation in March touched 6.95%, pushed by rising prices of fuel products and some food items. The print was higher than the 6.35% year-on-year forecast by economists in a Reuters poll, and 6.07% in the previous month.

COMMENTARY

RADHIKA RAO, ECONOMIST, DBS BANK, SINGAPORE

"Defying expectations of a let-up on base effects, March inflation was eye-popping at 6.95% y-o-y, highest since 4Q20 on gains in food due to inclement weather and global commodity upmove, including in perishables and edible oils."

"Considering that bulk of the impact of the incremental increase in pump prices, adjustment in natural gas and other variants is yet to filter through the headline, April-May is likely to remain uncomfortably elevated, apart from pipeline risks from passthrough of rising production costs and further rise in global food prices."

"Core CPI inflation (ex food and fuel) also ticked higher to 6.3% from Feb's 6%, firmest in nearly a year. Inflation is likely to remain in the front and center of the RBI's policy dashboard, posing upside risk to the quarterly official forecast and validating the central bank's hawkish pivot at the recent review."

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURGAON

"With the MPC (Monetary Policy Committee) having signaled an imminent stance change, the rate hike cycle may begin as early as June 2022, if the next CPI inflation print doesn't significantly cool off from the March 2022 level. We now expect to see 50-75 bps of rate hikes by the end of Q2 FY2023, followed by a pause in the second half of FY2023, and perhaps another 50 bps of hikes in FY2024."

"With the CPI inflation surging in March 2022, we expect the 10-year G-sec yield to cross 7.2% imminently. With dimming hopes of early bond index inclusion, the 10-year G-sec yield could test 7.5% in H1 FY2023."

UPASNA BHARDWAJ, SENIOR ECONOMIST - KOTAK MAHINDRA BANK, MUMBAI

"The sharply higher-than-expected March inflation reading further increases the challenge for the MPC as we now see significant upside risks to the recently revised trajectory provided by the committee. March reading broadly confirms the 2QFY23 average crossing significantly higher than 6%, thereby registering three quarters of inflation higher than the upper threshold in a row."

"We assign a very high probability of a rate hike of 25bps in the June policy along with a stance change."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"Sharp increase in food prices apart, India's core inflation moved up at a fast clip and crossed the 6% mark for the first time since September 2014."

"This reading further endorses our view that RBI would have to opt for a policy rate hike in the June meeting itself with a possibility of an inter-meeting hike in reverse repo rate to normalize the policy rate corridor."

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"Amid hardening of food prices owing to disrupted global supply chains and tight domestic agriculture commodity market, India's retail CPI inflation rose to 17-month high of 6.95%, probably explaining the sharp hawkish pivot of RBI in recent policy."

"Today's print will likely hasten the process of monetary policy normalization. We expect repo rate hike starting August 2022."

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI

"Inflation at 6.95% for March takes the average inflation for Q4 FY22 above 6.3%. Going ahead, inflationary impulses are going to go up, led by both food and fuel prices. We are headed for more challenging times ahead, given that growth is still weak, especially in consumer goods."

"RBI has to move on more cautiously in using its tool kit against inflation."

(Reporting by Rama Venkat, Chris Thomas and Chandini Monnappa; Editing by Devika Syamnath)