• CPI Y/Y 3.2% vs 3.1% expected
• Prior 2.1% (revised to 2.7%)

India’s retail inflation accelerated more than expected in February, reaching 3.21% on an annual basis. This follows a revised reading of 2.74% in January and surpasses the 3.1% consensus estimate predicted by economists.

The latest data, released by the Ministry of Statistics and Programme Implementation (MoSPI) on Thursday, marks the second month of reporting under India’s newly revised Consumer Price Index (CPI) framework, which recently shifted its base year from 2012 to 2024.

The primary catalyst for the uptick was a jump in food prices. Inflation for the Consumer Food Price Index (CFPI) rose to 3.47% in February, a significant increase from the 2.13% recorded in January.

Under the new 2024 base year, the weightage of food in the CPI basket has been reduced from approximately 46% to 36.75%. Despite this lower weight, the volatility in food costs remains a dominant factor in headline inflation movements.

The Reserve Bank of India (RBI) had previously cautioned that an “unfavourable base effect” from early 2025 would likely lead to a year-on-year uptick. Geopolitical tensions in the Middle East, particularly involving the Strait of Hormuz, have raised concerns about future “imported inflation” via rising global oil and energy prices.

The inflation rate remains below the Reserve Bank of India’s (RBI) medium-term target of 4.0%. In its February meeting, the Monetary Policy Committee (MPC) kept interest rates unchanged at 5.25%, maintaining a “neutral” stance.

The central bank is expected to remain in a “wait-and-see” mode, balancing the need to support 8% GDP growth with the risk of supply-side shocks in the food and energy sectors.

This article was written by Giuseppe Dellamotta at investinglive.com.