India’s retail inflation likely rose to 3.4% in March, but only marginally up from 3.2% in February, according to a median forecast of 16 economists in a Mint poll. The rise will push inflation to a 12-month high in March, up from a 10-month high in February. The data, however, is not strictly comparable due to the base year revision (from 2012 to 2024) from January 2026.
The March figure will be below the Reserve Bank of India’s (RBI) 4% medium-term target, even as war-led inflationary pressures are building up. Inflation will likely be driven by a fading base effect and rising prices in non-food segments, while the status quo on fuel prices and some moderation in gold and silver prices could offset some of the rise.
This will be the third CPI print under the new series with the 2024 base year. Economists in the poll expect March CPI to be within a wide range of 3.1% to 4%, with some flagging upside risks as the war has driven crude oil prices sharply higher.
“Headline CPI is expected to rise in March, led by an increase in non-food segments, even as food inflation is expected to remain steady,” said Aditi Nayar, chief economist at Icra Ltd.
Some economists flagged a fading base effect as another key driver. Dhiraj Nim, economist at ANZ Bank, said a fading base effect, particularly in the food basket, would likely push headline inflation higher. “Overall, headline CPI remains benign, but it is accelerating,” he added.
A few economists also highlighted the inflationary impact of the rise in prices of liquefied petroleum gas (LPG), aviation turbine fuel (ATF), and kerosene— all of which came under pressure after the West Asia war began on 28 February. Effective 7 March, domestic LPG cylinder prices rose by ₹60, while commercial cylinder costs increased by more than ₹100.
“Higher energy prices in March will be reflected in the CPI only to the extent that they passed through to domestic cooking gas prices, which were hiked modestly,” added ANZ’s Nim.
The union government and oil marketing companies (OMCs) have so far shielded consumers from elevated crude prices, though pump prices could rise further if oil remains high. Crude prices have eased since a two-week US-Iran ceasefire came into effect on 8 April, but they remain well above pre-war levels, keeping the outlook uncertain.
Most economists in the poll said risks to the inflation outlook are tilted to the upside, though much will depend on how long the conflict lasts.
The RBI also noted that the war in West Asia and a possible El Niño posed upside risks to inflation. This was reflected in its latest projections. The central bank raised is inflation projection for Q2 to 4.4% from 4.2% in the February policy. For Q3 and Q4, its projections were 5.2% and 4.7%. As such, the full-year FY27 projection shows inflation at 4.6%. surpassing the RBI’s 4% target.
The war is also likely to affect growth, with the RBI slashing its GDP growth projections by 10-30 basis points (bps) to 6.7-6.8% in the first half. Overall, it sees GDP growth slowing to 6.9% in FY27 from 7.6% in FY26.
Despite the upside risks to inflation, Nomura expects the RBI to keep rates on hold through the end of 2026. Even if inflation rises in FY27, rate hikes are not warranted unless core inflation moves past 5% sustainably or inflation expectations rise significantly, Nomura said in a report dated 8 April.