Ministry of Statistics and Programme Implementation (MoSPI) reported that India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 3.21% in February.
This is the second reading under the new 2024 base year series, marking a 10-month high (though comparisons to the old 2012 series are not direct). The uptick from January’s 2.74% was primarily driven by a surge in food and precious metal prices, even as the impact of the Iran-Israel conflict has yet to fully hit the retail data.
Key Inflation Drivers (February 2026)
The “47-basis-point” jump from January was fueled by three specific areas:
- The “Bullion Effect”: Geopolitical uncertainty sent gold and silver prices soaring. Silver jewellery inflation hit a staggering 160.8%, while gold/diamond jewellery stood at 48.2%.
- Food Rebound: Food inflation (CFPI) quickened to 3.47% from 2.13% in January. While vegetables like Tomato (45.3%) and Cauliflower (43.8%) remained high year-on-year, they actually cooled by over 10% on a month-on-month basis.
- Core Stability: Excluding food and energy, “core inflation” remained stable at around 3.4%, indicating that underlying demand-side pressure in sectors like health and communication is still benign.
Urban vs. Rural & Regional Splits
For the first time in several months, rural areas felt the pinch more sharply than cities.
| Category | February 2026 Inflation | January 2026 (Final) |
| Combined (Headline) | 3.21% | 2.74% |
| Rural | 3.37% | 2.73% |
| Urban | 3.02% | 2.75% |
- Regional Highs: Telangana recorded the highest inflation in the country at 5.02%, followed by Rajasthan (3.53%) and Kerala (3.50%).
- Kitchen Deflation: Some staples offered relief; Garlic (-31.1%), Onion (-28.2%), and Potato (-18.5%) all remained in deep deflation compared to last year.
The “New Basket” Context
Under the revised 2024 series, the CPI basket has shifted to reflect modern Indian spending:
- Food Weight: Reduced from 45.9% to 36.75%, making the headline number less sensitive to crop failures.
- Services Weight: Increased for housing, transport, and communication. Notably, rural housing is now included for the first time.
- Energy: LPG and electricity remained stable in February (0.14%), but economists warn that the recent ₹60 hike in LPG cylinders will only show up in the March report.
What This Means for Interest Rates
Despite the rise, inflation has remained below the RBI’s 4% medium-term target for 13 consecutive months. However, with crude oil flirting with $100–$150 per barrel due to the West Asia war, the RBI’s Monetary Policy Committee (MPC) is widely expected to keep the repo rate unchanged at 5.25% in April to wait for the “imported inflation” dust to settle.
