India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 3.21% in February from a revised 2.74% in January, according to government data released on March 12. The reading was marginally higher than the CNBC-TV18 poll estimate of 3.10%.Food inflation, a key component of the index, stood at 3.47% in February, compared with 2.13% in the previous month and above the poll estimate of 3%.
The data release also reflects a revised CPI series introduced by the government. The base year for the index has been updated to 2024 from 2012, while the number of items in the consumption basket has been increased to 358 from 299 earlier.
The revised series indicates that prices have been rising sequentially for four straight months. The CPI index stood at 104.57 in February, up from 104.46 in January and 104.10 in both November and December.A notable change in the updated CPI basket is the reduced share of food. Food’s weight in the index has fallen below 40% for the first time, while non-food categories now account for more than 60% of the basket, compared with roughly 45% earlier.Among other components, rural inflation rose to 3.37% from 2.73% in January, while urban inflation increased to 3.02% from 2.77%.Housing inflation edged up to 2.12% from 2.05%, while clothing and footwear inflation moderated slightly to 2.81% from 2.98%. Inflation in restaurant and accommodation services eased to 2.73% from 2.87%, while health inflation slowed to 1.90% from 2.19%.Inflation in information and communication services rose marginally to 0.25% from 0.16%, while the personal care and miscellaneous category remained elevated at 19.64%, compared with 19.02% in January.Analysts flag crude risks, policy watchVikrant Chaturvedi, Associate Director – Research at Brickwork Ratings, said the inflation outlook could still face external risks despite relatively stable underlying price pressures.“From a monetary policy perspective, the current inflation mix allows the RBI to remain patient while balancing growth support with vigilance on food and commodity-driven spikes. However, the US–Iran conflict and rising crude oil prices pose upside risks through fuel and input-cost channels,” he said.As per, Rajani Sinha, Chief Economist at CareEdge Ratings, should average crude prices rise to $100 per barrel or higher, CPI inflation could move above 5% in FY27. “Additionally, a higher probability of an El Niño event in FY27 could put further pressure on food inflation,” she said adding that weather risks could also play a role in shaping the inflation outlook ahead.Meanwhile, Vivek Rathi, National Director- Research, Knight Frank India said geopolitical tensions could create fresh volatility through imported price pressures. “Geopolitical tensions in West Asia could add fresh upside risks through higher crude oil prices and a weaker rupee, potentially feeding imported inflation,” he said, adding that the RBI is likely to maintain a cautious, data-dependent stance while managing volatility through liquidity and forex tools.Echoing similar concerns, Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Group, said while recent inflation readings indicate moderate underlying price pressures, the spike in global energy prices could create near-term risks.“The recent spike in oil and gas prices raises some upside risks to inflation in the coming months. However, these pressures are likely to be transitory,” Hajra said, adding that the RBI could adopt a more accommodative liquidity stance.
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