NEW DELHI: India’s retail inflation firmed up to 3.21% in February, hit by the rise in prices of food and beverages, clothing and housing and utility services, according to provisional data released by the ministry of statistics and programme implementation on Thursday.
The latest Consumer Price Index (CPI) data can’t be compared with the year-ago period due to the reset of the index basket in January. Retail inflation was recorded at a revised 2.74% in January, marking the debut for the new series with 2024 as the base year.
Food inflation under the new series stood at 3.47% in February, up from 2.13% in January. Housing inflation stood at 2.12% last month against 2.05% in January.
Silver, gold, diamond and platinum jewellery as well as vegetables such as tomato and cauliflower and copra were among the items that had the strongest inflationary pressure. Garlic, onion, potato, arhar and litchi continued to witness deflationary trend in February as well, the data showed.
Kerala reported the highest food inflation of 6.17% among the top five states with a strong inflationary trend. West Bengal was second with 5.54% food inflation.
Telangana had 5.02% retail price inflation, the highest among states. Retail price inflation in February is an 11-month high, largely on account of higher food inflation, said Devendra Kumar Pant, chief economist at India Ratings and Research.
The war in West Asia resulted in crude prices crossing $100 a barrel before receding and the International Energy Agency announced that its member-countries have agreed to release 400 million barrels of oil from their emergency reserves to stabilize crude prices, he said.
“However, as long as the war continues, oil prices are likely to remain elevated. Despite the hardening of crude and petroleum product prices, the retail prices of petrol and diesel have remained the same and are expected to remain the same in the near-term,” said Pant.
Interest rate
India Ratings and Research predicted that March retail inflation will increase to 3.7%. The Reserve Bank of India will be watchful, and we can expect a long pause on policy rates, he said.
While CPI-based inflation has been at the lower band of the RBI’s 2-6% target range in six of the past seven months, the central bank’s rate-setting panel kept key policy rates unchanged in its latest monetary policy move.
However, with the conflict and disruptions in West Asia impacting prices of oil and gas, food products and other essentials, experts expect the RBI to keep the key interest rate unchanged at its next monetary policy meeting slated for early April.
Inflation under the old CPI series, with 2012 as the base year, was 1.33% in December and 0.71% in November.
The February print was above estimates. According to a Mint poll on CPI data, retail inflation under the new series was expected to rise to 3.1% in February.
Food items account for a large share of the CPI, meaning sharp swings in food prices often dominate headline inflation, pushing it up or down irrespective of broader price trends. From June 2025, food inflation turned negative, with prices consistently lower than a year earlier. This sharply pulled down headline CPI inflation, which fell to an all-time low of 0.25% in October 2025, alongside record-low food inflation of -5.02%.
Recalibrated weights
The new index, which uses 2024 as its base year, is built on spending patterns captured in the 2023-24 Household Consumption Expenditure Survey. The recalibrated weights for index components under the new series have pushed up India’s headline inflation readings modestly, with the share of core items rising about 10 percentage points and volatile food prices getting a smaller say, according to economists’ estimates.
The new CPI series also raises housing’s share, reshaping inflation measurement, easing volatility and altering how the RBI interprets headline inflation trends.
As things stand, the new CPI series provides policymakers with a more up-to-date basis for assessing real incomes, consumption trends and purchasing power. A lower weight for the otherwise-volatile group of food and beverages may make headline inflation less volatile.
Last month, following the release of the new retail inflation index, the central government’s chief economic adviser V. Anantha Nageswaran said that if CPI volatility declines, it means that fiscal expenditure volatility, such as dearness allowance fixation and inflation-indexed bonds, which are linked to CPI, would also become more stable and more predictable and reliable.
He added that by extending rent measurement to rural areas and improving sampling coverage, the CPI now captures housing costs more accurately across regions.