Food prices push retail inflation in February to 3.2%

NEW DELHI: Retail inflation inched up by 47 basis points in Feb, largely led by an increase in food & beverages and personal care & effects inflation. The West Asia conflict is likely to add further pressure.

Data released by the National Statistics Office (NSO) on Thursday showed retail inflation, as measured by the consumer price index (CPI), rose an annual 3.2% in Feb, higher than the 2.7% in Jan. The food index rose 3.5% in Feb, above the 2.1% in the previous month.

Rural inflation was at 3.4% while urban was lower at 3%. This is the second month under the new base year of 2024 and the weightage of food has been reduced under the new series.

Core inflation, after stripping out food and fuel, was steady at 3.4%. The data showed that personal care, social protection and miscellaneous goods and services inflation surged to 19.6%, led by gold and silver.

"A higher probability of an El Nino event in FY27 could adversely impact food inflation. Given these risks, it will be important to closely monitor the trajectory of geopolitical tensions in West Asia and the weather events," said Rajani Sinha, chief economist at ratings agency CareEdge.

Economists at HDFC Bank said the increase in cooking gas prices by Rs 60 per 14.2 kg is likely to have an impact of 14 basis points on the headline CPI from March 2026 onwards. "In our baseline scenario, CPI inflation is expected to average at 4.2% in FY27 vs 2.1% in FY26. However, if the upward pressure on crude and petroleum products sustains in the coming months, we see an upside risk to our forecast," said Sakshi Gupta and Deepali Mathew, economists at HDFC Bank.

"At this stage, we continue to expect the RBI to remain on hold throughout FY27, keeping the repo rate at 5.25%," the economists said in a note.