NEW DELHI: India’s retail inflation rose to 3.4 per cent in March from 3.21 per cent in February, driven by an uptick in food and fuel prices, according to data released by the National Statistics Office (NSO) on Monday.
This marks the first full month of data since the US-Iran war, which has disrupted global fuel supplies and spurred prices higher. Experts believe that concerns over a prolonged conflict and the forecast of a deficient monsoon could raise the cost of living in the coming months and may prompt the Reserve Bank of India (RBI) to pause policy rate changes.
The March reading — the third print under the updated 2024 Consumer Price Index (CPI) series — is estimated to be a 13-month high when compared with the back series data released by the NSO. The last time inflation exceeded the March level was in March 2025, when it stood at 3.56 per cent.
Retail prices increased in both rural and urban India compared to the previous month. While CPI (Rural) rose to 3.63 per cent in March from 3.37 per cent in February, urban inflation edged up to 3.11 per cent from 3.03 per cent.
Megha Arora, director at India Ratings & Research (Ind-Ra), said inflation could increase further to 3.8 per cent in April and exceed the RBI’s forecast of 4 per cent for the first quarter of FY27, due to elevated energy prices that will be passed on to consumers and higher input and transportation costs, as well as rising gold and silver prices.
Food inflation, measured by the Consumer Food Price Index (CFPI), rose to 3.87 per cent in March from 3.47 per cent in February, driven by sharp price increases in items such as coconut (45.52 per cent), tomato (35.99 per cent), and cauliflower (34.11 per cent). Other items, including green chillies (32.88 per cent), cabbage (25.4 per cent), and raisins (25.28 per cent), also recorded elevated inflation rates.
In contrast, some food items, including onion (-27.76 per cent), potato (-18.98 per cent), and garlic (-10.18 per cent), saw deflation during the month.
Inflation in the electricity, gas, and other fuels category rose to 1.65 per cent in March, up from 0.14 per cent in February and 0.35 per cent in January, driven by fuel price increases linked to the West Asia crisis.
“Consequently, inflation for the LPG user segment in restaurants and accommodation services also increased to 2.88 per cent,” Arora said.
In its latest bimonthly review meeting, which concluded on April 8, the Monetary Policy Committee (MPC) of the RBI projected CPI inflation at 4.6 per cent for FY27, with quarterly estimates of 4 per cent in Q1, 4.4 per cent in Q2, 5.2 per cent in Q3, and easing to 4.7 per cent in Q4.
Rajani Sinha, chief economist at CareEdge Ratings, said the agency expects RBI to maintain the status quo on policy interest rate. “In fact, it can explore the possibility of a rate cut towards the end of the financial year if the growth outlook deteriorates significantly below the long-term potential growth,” added Sinha.
Madan Sabanavis, chief economist at Bank of Baroda, said the central bank would closely monitor the rising inflation trend, particularly in light of the ongoing conflict and monsoon outlook, before making any policy decisions. “A prolonged pause, as of now, looks very likely,” he said.
The revised series recalibrates items earlier clubbed into six groups to 12 divisions. Of these, inflation in the transport division remained flat during the month, while all other divisions recorded positive inflation. Personal care and social protection led with 18.65 per cent, down from the 19.64 per cent in February, followed by pan, tobacco, and intoxicants, which recorded inflation of 4.23 per cent.
Among states with a population of more than 5 million, Telangana retained the highest inflation rate at 5.83 per cent, followed by Andhra Pradesh (4.05 per cent), Karnataka (3.96 per cent), Tamil Nadu (3.77 per cent), and West Bengal (3.64 per cent). Karnataka and Tamil Nadu re-entered the top five in March after slipping out in February, while Kerala exited the list.
Mizoram recorded the lowest inflation rate at 0.66 per cent, followed by Chhattisgarh at 1.35 per cent.
Source: Business Standard
