MELBOURNE: An unbeaten half-century by Shaun Marsh put Australia in a strong position on Monday, setting India a near-record task if they are to win the third Test in Melbourne.

Marsh produced one of his finest knocks for his country with 62 to steer Australia to 261 for seven, giving the hosts an overall lead of 326 runs heading into Tuesday's final day.

The Indians will have to defy history at the famous Melbourne Cricket Ground where they have not won for 33 years to keep the Border-Gavaskar Trophy series alive to next week's fourth and final Test in Sydney.

The highest successful run chase in the fourth innings at the MCG remains 332 for seven by England against Australia in 1928.

Teams have struggled to score more than 250 in the fourth innings on the drop-in pitch in recent years, with India all out for 169 (2011) and 161 (2007) in their last two Tests at the ground, both defeats.

Australia has to decide whether to declare overnight or bat on with a total of 96 overs to be bowled on the fifth day.

It was Marsh's fighting innings which tilted the Test Australia's way after India reduced the home side to 176 for five, claiming the key wickets of Steve Smith and Chris Rogers in the process.

The tourists kept the clamps on the Australian batting in a tense final session, before Marsh clawed back the advantage.

The tourists removed Smith for just 14 after the Aussie skipper scored 192 in the first innings in his third century of the series.

Veteran opener Rogers reached his fourth consecutive half-century of the series but again failed to go on with it and was bowled by Ravi Ashwin for 69 nearing tea.

Rogers dropped on 33

Rogers was dropped on 33 in the slips by Shikhar Dhawan on the second ball after a lengthy rain delay and had another big moment on 56 before his dismissal.

Umpire Richard Kettleborough called for the video umpire to check if the ball had carried in a claimed catch by MS Dhoni off Mohammed Shami.

But replays showed the ball hitting the ground in Dhoni's glove and Rogers was given a reprieve. He added another 13 runs before he edged on to his stumps.

India celebrated the important pyschological wicket of Smith in one of their rare successes against the prolific Aussie skipper in the series.

Smith was caught at leg-slip by Ajinkya Rahane off Umesh Yadav after playing a similar shot for a boundary a few overs before.

Shane Watson again failed to nail a big score when he was caught behind off Ishant Sharma for 17.

Debutant Joe Burns was out to a poor shot and was caught behind off Sharma for nine, while Brad Haddin (13) and Mitchell Johnson (15) were also caught behind.

Australia lost explosive opener David Warner before lunch after he was looking threatening.

He played forward but was struck on the back pad and was given out leg before wicket for 40 off 42 balls with six fours.

Australia quickly mopped up India's first innings for 465 to lead by 65 with Johnson snaring both wickets of Yadav and Shami for the addition of just three runs to the overnight score.

India lost their last seven wickets for 56 after Virat Kohli (169) and Rahane's (147) ground record 262-run partnership for the fourth wicket.

It was yet again another lower order collapse to highlight one of the main differences between the two sides.