India CPI Inflation Hits 3.21% in Feb 2026 on Gold, Food Price Surge

Introduction: Inflation Accelerates in February

India's retail inflation, measured by the Consumer Price Index (CPI), rose to 3.21% in February 2026, marking an 11-month high. This figure represents a notable increase from the 2.74% recorded in January. According to data released by the Ministry of Statistics & Programme Implementation (MoSPI), the acceleration was primarily fueled by a sharp rise in food prices and a persistent surge in the cost of precious metals. This is the second inflation reading under the new CPI series, which uses 2024 as the base year to better reflect current household consumption patterns.

The inflation rate in rural areas stood at 3.37%, slightly higher than the 3.02% observed in urban centers. Despite the month-on-month increase, the headline inflation figure remains within the Reserve Bank of India's (RBI) tolerance band of 2% to 6%.

The Bullion Effect: Gold and Silver Drive Prices Higher

A significant contributor to the February inflation figure was the personal care segment, which saw inflation of 19.6%. This was largely driven by the relentless increase in the prices of precious metals amid global geopolitical uncertainty. The average price of silver jewellery for consumers recorded a staggering 160.84% year-on-year increase, up slightly from 160.12% in January. Similarly, gold, diamond, and platinum jewellery prices rose by 48.16% year-on-year, compared to 46.80% in the previous month.

Madan Sabnavis, Chief Economist at Bank of Baroda, noted that this upward thrust from precious metals was on expected lines and is likely to continue exerting pressure in March. The depreciation of the rupee could also add to these costs, further impacting the segment.

Food Inflation Heats Up

Food inflation, a critical component of the CPI basket, experienced a sharp uptick, with the Consumer Food Price Index (CFPI) rising to 3.47% in February from 2.13% in January. The increase was led by a surge in the prices of certain vegetables. Tomato price inflation, for instance, stood at 45.29%, while cauliflower prices rose by 43.77%.

However, the trend was not uniform across all food items. Several commodities provided relief, with their prices continuing to fall on an annual basis. This divergence highlights the volatility within the food basket.

Understanding the New CPI Series

The February data is based on the revised CPI series with a base year of 2024, replacing the previous 2012 base. This new series incorporates significant changes in the weightage of various components to reflect evolving consumption patterns. It assigns greater weight to services like housing, transport, and communication, and also includes modern expenses such as online shopping and OTT subscriptions. Crucially, the combined weight of diesel, petrol, and LNG has increased from 2.4% to 4.8%, making headline inflation more sensitive to fluctuations in retail energy prices.

Regional Disparities and Core Inflation

Inflation trends varied significantly across different states. Southern states, including Kerala, Tamil Nadu, Andhra Pradesh, and Karnataka, recorded higher-than-average inflation. Telangana registered the highest rate at over 5%. In many of these states, rural inflation was higher, reflecting the impact of elevated food prices in those regions.

Despite the headline increase, core inflation, which excludes volatile food and fuel prices, was estimated to be stable at around 3.4%. This suggests that underlying demand-side pressures in other sectors of the economy remain contained. The stability in core inflation provides some comfort, indicating that the current price pressures are concentrated in specific, supply-sensitive categories.

Geopolitical Risks and Future Outlook

Analysts are closely monitoring external risks that could impact future inflation. The February data does not yet capture the full effect of the ongoing geopolitical crisis in West Asia. A sustained increase in global crude oil prices poses a significant upside risk. According to Care Ratings, a $10 per barrel rise in crude oil prices could lead to a 55-60 basis point increase in headline inflation, assuming the costs are fully passed on to consumers.

Furthermore, the increased probability of an El Nino weather event in the 2026-27 fiscal year could adversely affect agricultural output and food inflation. Economists project that March inflation will likely remain in the 3.2% to 3.5% range. For the upcoming fiscal year (FY27), analysts at Crisil and HDFC Bank forecast average CPI inflation to be between 4.2% and 4.3%.

RBI's Stance

Given the current dynamics, the Reserve Bank of India is expected to maintain its current policy stance in its next meeting. The central bank had previously flagged rising precious metal prices as a key factor influencing its inflation outlook. While the RBI will continue to monitor the impact of geopolitical tensions and weather patterns, the stable core inflation provides room to focus on supporting economic growth. The central bank's projections for FY27 see inflation rising to 4.0% in Q1 and 4.2% in Q2 as price pressures gradually normalize.