India's Headline Retail Inflation Rises To 3.21 pc in Feb.

New Delhi: Amid trade uncertainty and geopolitical tensions in the Middle East due to the ongoing conflict involving Iran, Israel and the United States, India’s headline retail inflation rose to 3.21 per cent in February from at 2.74 per cent in January, the government said on Thursday.

The government’s inflation print comes at a time when there is a concern over disruptions to global oil supplies, which can lead to rise in inflation in the near future. Economists, however, feel that prolonged supply constraints could translate into imported inflation for energy-dependent economies such as India.

As per the data released by the National Statistics Office (NSO), retail inflation in the country moved up to 3.21 per cent in February compared to 2.74 per cent in the preceding month. “Food inflation, which carries the largest weight in the CPI basket, also quickened 3.47 per cent in February, compared with 2.13 per cent in January,” the NSO data showed.

As per the data, the major items that witnessed a high pace of price hike were silver, gold, diamond, platinum jewellery, coconut-copra, tomato, and cauliflower among others, while there was disinflation in garlic, onion, potato, arhar, and litchi. Price pressures in several services and household segments also remained in focus under the revised CPI basket as well.

The data further showed that rural inflation rose to 3.37 per cent in February from 2.73 per cent in January, while urban inflation increased to 3.02 per cent from 2.75 per cent, remaining below the Reserve Bank of India’s medium-term target of 4 per cent. “Inflation in the electricity, gas and other fuels category stood at 0.14 per cent,” the data showed.

However, economists and analysts are of the view that if the ongoing West Asia war prolongs, there may be an impact on supply chains, which could translate into imported inflation for energy-dependent economies such as India. “The price hike of domestic and commercial LPG cylinder prices in early-March 2026 owing to global energy supply disruptions would exert upward pressure on inflation for the electricity, gas & other fuels, and restaurant & accommodation divisions in this month,” said Aditi Nayar, chief economist, Icra Ltd.

“The ongoing geopolitical tensions in West Asia regions pose upside risks to the CPI inflation trajectory, if sustained for an extended period; as per Icra’s analysis, every 10 per cent increase in average crude oil prices increases the CPI inflation by 40-60 bps, assuming that a full transmission into retail selling prices (RSPs) of auto fuels takes place,” Nayar said.

“Looking ahead, with a somewhat lower weight for F&B in the new CPI series (36.75 per cent: 2024 series) vis-à-vis the old series (45.86 per cent: 2012 series), the expected base-effect led uptick in the headline CPI print in FY2027 would likely be tempered, after the initial uptick, resulting in a flatter curve even as the average would likely remain around 4 per cent in our base case for FY2027,” Nayar added.