India's Retail Inflation Rises to 3.2% in February

India's Retail Inflation Edges Up to 3.2 Percent in February

Key Figures:

• 3.2%: India's retail inflation in February
• 2.74%: Revised retail inflation in January
• 4%: Reserve Bank of India's medium-term target for inflation
• 104.57: Consumer Price Index (CPI) in February
• 104.46: CPI in January
• 104.10: CPI in November and December

India's Retail Inflation Edges Up to 3.2 Percent

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India's retail inflation edged up to 3.2% in February, compared with a revised 2.74% in January, according to government data released on March 12. This modest pick-up in price pressures reflects a gradual increase in inflation, even as inflation remains well below the Reserve Bank of India's medium-term target of 4%.

New CPI Series Reflects Gradual Building of Price Pressures

The latest numbers come under the new Consumer Price Index (CPI) series, which the government introduced in January after revising the base year to 2024 from 2012 and expanding the basket of items tracked to 358 from 299 earlier. The CPI index rose to 104.57 in February, up from 104.46 in January and 104.10 in November and December, marking the fourth straight month of sequential increases in the price index.

Shift in Inflation Basket

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A notable feature of the revised CPI structure is the reduced dominance of food in the inflation basket. Food's weight has fallen to below 40%, compared with roughly 45% in the earlier series, while non-food categories now account for over 60% of the index. The revised structure also gives greater effective weight to rural consumption, reflecting the growing importance of rural demand in India's consumption basket.

Food Inflation Accelerates

Food inflation accelerated during the month, with price increases in the food category rising to 3.47% in February from 2.13% in January. However, the overall impact of food on headline inflation is expected to be lower than in the past due to the reduced weight assigned to the category.

Other Notable Price Increases

Beyond food, several components recorded moderate price increases. Paan and tobacco inflation climbed to 3.64% from 1.96%, while housing-related costs such as maintenance and repairs rose to 3.26% from 3.2%. Education inflation remained elevated, with secondary education at 4.09% and higher education at 3.59%.

Transport and Durable Goods Prices

Transport-related costs were mixed, with inflation for transport services for goods remaining high at 7.49%, though passenger transport services eased to 1.75% from 2.17%. Meanwhile, durable goods prices remained subdued, with vehicle prices continuing to contract by 4.65%, reflecting soft demand and price competition.

Niche Consumption Categories

Some niche consumption categories recorded particularly sharp increases. Other personal effects inflation rose to 60.8% from 59.23%, with silver inflation at 160%, while gold prices rose 48.2% in February. Garden products and pets inflation remained elevated at 8%.