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India’s Consumer Price Index (CPI) – based retail inflation rose to 3.21 percent in February 2026, the second reading under the new series with 2024 as the base year, due to a surge in the prices of precious metals amid geopolitical uncertainty. This marks a 47 basis points (bps) increase from 2.74 percent recorded in the previous month. The new series, applicable from January 2026, entails significant changes in the weightage of various constituents, including food items.
Average price of silver jewellery for consumers rose 160.84 percent in February versus 160.12 percent rise in January. Gold/diamond/platinum jewellery price also shot up by 48.16 percent in February versus 46.80 percent in January. A statement from the Ministry of Statistics & Programme Implementation (MoSPI) said, “The year-on-year inflation rate based on the All India Consumer Price Index (CPI) with base year 2024 for the month of February 2026 over February 2025 is 3.21 percent (provisional). The corresponding inflation rates for rural and urban areas are 3.37 percent and 3.02 percent, respectively.”
Madan Sabnavis, Chief Economist at Bank of Baroda, commented, “India’s CPI inflation for February 2026 came in at 3.2 percent against our projection of 3.3 percent. The trend in inflation has been on expected lines. The main upward thrust came from the personal care segment, where inflation was 19.6 percent. The relentless increase in prices of silver and gold has contributed to this rise. This will be a factor that continues to exert pressure in March as well, given the global uncertainty. Further, the depreciation of the rupee would also add to these costs.”
Food inflation heats up
The Ministry’s data showed India’s food inflation at 3.47 percent in February 2026, sharply up from 2.13 percent in January 2026. An increase in the prices of some vegetables also contributed to this rise. According to the Ministry’s data, tomato price inflation rose by 45.29 percent in February, compared with an average increase of 64.58 percent in January. Similarly, the retail inflation rate for cauliflower increased to 43.77 percent in February, compared with 37.83 percent in January. These surges, among others, were major drivers of the rise in food inflation.
Food and beverages also recorded inflation of 3.3 percent, as base effects became less potent. Meanwhile, retail inflation for garlic plunged to (-)31.09 percent in February, compared with (-)53.03 percent in January, while onion inflation stood at (-)28.20 percent versus (-)29.30 percent in the previous month. Potato inflation also narrowed to (-)18.46 percent in February, compared with (-)28.98 percent in January. Among pulses, tur dal recorded average retail inflation of (-)16 percent in February, versus (-)24.90 percent in the previous month.
The year-on-year inflation rate based on the All India Consumer Food Price Index (CFPI) for February 2026 over February 2025 stood at 3.47 percent (provisional). The corresponding inflation rates for rural and urban areas were 3.46 percent and 3.48 percent, respectively. Notably, the revised CPI basket assigns greater weight to services such as housing, transport, and communication, reflecting the growing importance of the services sector in household spending.
Varying pattern
Across states, inflation showed a varying pattern. The southern states of Kerala, Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka recorded higher-than-average inflation, with Telangana registering the highest inflation at over 5 percent. Uttar Pradesh, West Bengal, Odisha, and Madhya Pradesh also reported above-average inflation. In most of these states, rural inflation tended to be higher, reflecting elevated food prices in these regions.
Overall, education inflation stood at 3.3 percent, while it was 3 percent in rural India. This trend could continue to show an increase in the coming months. The year-on-year housing inflation rate for February 2026 stood at 2.12 percent (provisional), while the corresponding inflation rates for rural and urban areas were 2.43 percent and 2 percent, respectively.
No Iran war impact yet
February data does not account for the impact of the war, and therefore March inflation is likely to reflect the initial effects, particularly through higher fuel prices, especially liquefied petroleum gas (LPG). March inflation is expected to remain in the range of 3.2–3.5 percent, based on market observations so far, particularly in the food segment.
The latest study from Care Ratings Ltd states: “Under the new CPI series, inflation has become more sensitive to retail energy prices. The combined weight of diesel, petrol, and LNG has increased to 4.8 percent, compared with 2.4 percent in the previous CPI series. Therefore, a US$10 a barrel increase in crude oil prices could lead to an estimated 55–60 basis points (bps) rise in headline inflation—around 45 bps from direct effects and 10–15 bps from indirect effects. This assumes full pass-through of higher global crude oil prices to consumers. However, oil marketing companies (OMCs) are likely to absorb part of the rise in crude oil prices, thereby limiting the impact on retail inflation.”
Indirect effects could also arise through higher input costs. OMCs are expected to be able to absorb average crude prices of up to around US$90 a barrel over the medium term, supported in part by stronger refining margins. However, if disruptions persist for longer and average crude prices remain above US$ 90 a barrel, OMCs may pass on a portion of the higher costs to consumers. The pass-through to consumers could be higher if crude oil prices average above US$ 100 a barrel. Meanwhile, the government has already hiked retail and commercial gas cylinder prices by Rs 60 and Rs 115, respectively.
Rajani Sinha, Chief Economist, Care Ratings Ltd, said, “Going forward, rising crude oil prices amid the West Asia crisis pose an upside risk to retail inflation. Oil marketing companies are expected to absorb crude prices of up to around US$ 90 a barrel over the medium term. However, if disruptions persist and crude prices remain above US$ 90 a barrel, OMCs may pass on part of the higher costs to consumers. If average annual crude oil prices remain elevated at US$ 100 a barrel or higher, CPI inflation could rise above 5 percent in FY 2026-27, against the pre-war projection of 4.3 percent.”
Additionally, higher probability of an El Nino weather event in FY 2026-27 could adversely impact food inflation. Given these risks, it will be important to closely monitor the trajectory of geopolitical tensions in West Asia and the weather events. To support the Kharif sowing, government would continue to ensure fertiliser affordability and availability, despite the impact from the West Asia conflict. So far, the Reserve Bank of India (RBI) is expected to leave the policy rate unchanged in the next meeting, while closely assessing the crisis.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
