India's Retail Inflation Hits 10-Month High at 3.21% in February

India’s headline retail inflation rose to a 10-month high of 3.21% year-on-year (YoY) in February, edging up from 2.74% in January, according to data released by the Ministry of Statistics and Programme Implementation on Thursday. The increase was largely driven by food and precious metal prices, along with base effects. Food inflation was 3.47% in the month, while combined food and beverages inflation stood at 3.35%. Economists noted that the February print does not reflect any inflation pressures from the West Asia war. However, they warned that rising crude oil prices amid West Asia tensions pose an upside risk to retail inflation. Most of them also expect the Reserve Bank of India ( RBI ) to maintain a long pause on policy rates. The headline inflation figure remained below the RBI’s medium-term target of 4% for the 13th consecutive month. The February print is only the second reading under the new, 2024-base consumer price index series. The top five items with high inflation in February were silver jewellery (160.84%), gold/diamond/platinum jewellery (48.16%), coconut: copra (46.16%), tomato (45.29%), and cauliflower (43.77%). Inflation in the personal care segment stood at 19.64%, with other personal effects at 60.80%. Housing inflation was 2.12%. Apart from food, jewellery prices, particularly gold and silver, also contributed significantly to the February inflation print, reflecting the impact of the global bullion rally on domestic inflation. Core inflation (excluding food and energy) is estimated at around 3.4%, indicating contained demand-side pressures in housing, health, and communication, said Vikrant Chaturvedi, Associate Director – Research, Brickwork Ratings. “This divergence between food and precious metals volatility versus relatively stable core highlights that while headline prints remain sensitive to supply shocks and asset price surges, underlying inflation dynamics are still benign.” Aditi Nayar, Chief Economist at Icra Ltd, however, underlined that the uptick in February was almost entirely led by the food and beverages (F&B) segment, which accounted for as much as 44 basis points of the 47 bps rise in the headline print from January. Sakshi Gupta, Principal Economist at HDFC Bank , said the year-on-year increase in the headline print was due to base effects, but on a sequential basis, there was moderation across both core and food. Rajani Sinha, Chief Economist at CareEdge Ratings, said oil marketing companies are expected to absorb crude prices up to around $90 per barrel over the medium term. She added that if disruptions persist and crude prices remain above $90 per barrel, OMCs may pass on part of the higher costs to consumers. “If average annual crude oil prices remain elevated at $100/bbl or higher, CPI inflation could rise above 5% in FY27. This is against our base case projection of 4.3% for FY27, prior to the war situation,” Sinha said. Rural inflation stood at 3.37% and urban at 3.02% in February. Devendra Pant, Chief Economist at India Ratings and Research, noted that despite hardening crude and petroleum product prices, retail prices of petrol and diesel have not increased and are expected to remain the same in the near term. LPG prices have been increased by Rs 60 per cylinder, he said. “Factoring in the continuing increase in food products price/inflation in March, LPG price hike, and evolving currency movements, Ind-Ra expects March 2026 retail inflation to increase to 3.7%,” Pant said. Noting that March inflation would reflect the initial impact of higher fuel prices, especially LPG, Madan Sabnavis, Chief Economist at Bank of Baroda, expects March inflation to be in the range of 3.2-3.5%. From a monetary policy perspective, Pant stated that the Reserve Bank of India (RBI) is watchful and his agency expects a long pause on policy rates. Nayar also said that heightened uncertainty from geopolitics transmitting into India’s growth and inflation outlook supports the case for a pause in the upcoming April 2026 Monetary Policy Committee (MPC) meeting. In the February MPC meeting, the RBI kept the policy rate unchanged at 5.25%.