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India's retail inflation is expected to have moved above 3% in February, mainly due to a gradual increase in food prices and the fading of the favourable base effect seen in previous months. Economists estimate that the Consumer Price Index (CPI) rose slightly compared with the 2.75% inflation recorded in January. Despite the increase, inflation is still expected to remain below the Reserve Bank of India's medium-term target of 4%. The data is being closely tracked as it provides signals on price trends, food cost pressures, and possible implications for future monetary policy decisions.
India's retail inflation is estimated to have moved above 3% in February, according to projections by economists and financial analysts. The expected increase comes after inflation stood at 2.75% in January under the revised Consumer Price Index (CPI) series with 2024 as the base year. Advertisement
The rise in February inflation is largely linked to a gradual increase in food prices and the fading of the favourable base effect that had kept inflation relatively low in recent months. Economists expect the overall CPI reading to move slightly above the 3% level, though it is still projected to remain comfortably below the Reserve Bank of India's 4% medium-term inflation target.
Food inflation continues to be a major factor influencing overall retail inflation in India. Prices of key food items such as vegetables, cereals and some essential commodities have shown signs of firming up after declining in previous months. This recovery in food prices has contributed to the expected increase in the headline inflation number.
At the same time, the rise in inflation is considered moderate and part of a gradual normalization in price trends. Inflation had remained unusually low toward the end of 2025 due to softer food prices and favourable statistical base effects. As those base effects start to fade, economists had already expected inflation readings to move slightly higher in the following months.
January's inflation reading was also significant because it was the first figure released under the newly revised CPI framework. The updated index uses 2024 as the base year and reflects changes in consumption patterns across Indian households. The revision was based on the Household Consumption Expenditure Survey conducted during 2023-24.
Under the updated CPI basket, weightages for various consumption categories have been adjusted to better reflect present-day spending habits. While food items continue to hold the largest share in the index, the weight has been marginally reduced compared with the earlier series. Categories such as housing, services and other consumption items have received revised weightages to improve the accuracy of inflation measurement.
The updated CPI series also expands the number of items tracked and improves price data coverage across both rural and urban markets. The government periodically revises the CPI base year to ensure that inflation measurement reflects evolving consumption behaviour and market conditions.
Despite the expected increase in February, overall price pressures in the economy remain relatively stable. Core inflation, which excludes food and fuel, has stayed moderate, indicating that underlying demand-driven inflation in the economy is still contained.
The inflation data is closely monitored by policymakers and market participants because it plays a key role in shaping the Reserve Bank of India's monetary policy decisions. With inflation remaining below the central bank's medium-term target level, economists believe the RBI may continue to maintain a cautious and balanced policy approach while monitoring further price developments.
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