Rural areas face slightly higher price pressures, while precious metals and energy costs shape overall CPI trends under the revised 2024-base index
India’s retail inflation rose to 3.21 per cent in February 2026, driven by higher prices in food and beverages, clothing, housing and utility services, according to provisional data released on Thursday by the Ministry of Statistics and Programme Implementation showed inflation based on the Consumer Price Index (CPI) increasing from 2.74 per cent in January, marking the second reading under the revised CPI series with 2024 as the base year.
The latest Consumer Price Index (CPI) reading also comes amid global trade uncertainties and geopolitical tensions in West Asia. The February figure was 47 basis points higher year-on-year (YoY) compared with February 2025, while inflation remained slightly higher in rural areas at 3.37 per cent, while urban inflation stood at 3.02 per cent, according to data compiled by the National Statistics Office.
“The CPI inflation came in line with expectations, with core inflation remaining broadly steady. Going ahead, however, inflation risks are increasing given the supply side disruptions from the Middle East crisis. We expect RBI to maintain a status quo on rates for now as they assess the longevity and the impact of the crisis. Meanwhile, we expect RBI to continue to keep liquidity conditions comfortable to ensure financial conditions remain benign to avert any crunch,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
The All India CPI index (base year 2024=100) stood at 104.45 during the month. The rural CPI index was recorded at 104.59, while the urban CPI index stood at 104.28, according to the National Statistics Office.
Food Inflation Accelerates
Food inflation, which is the largest component of the CPI basket, rose to 3.47 per cent YoY in February, compared with 2.13 per cent in January, whereas the rural area food inflation was estimated at 3.46 per cent, while urban food inflation was marginally higher at 3.48 per cent according to official data.
The rural CFPI index stood at 103.89, compared with 104.31 in urban areas. From June 2025, food inflation had turned negative, pulling down overall retail inflation. This trend contributed to headline CPI dropping to 0.25 per cent in October 2025, alongside food inflation of -5.02 per cent.
Despite the increase in food inflation, prices of some vegetables declined on a monthly basis. The index showed that tomatoes, peas and cauliflower recorded more than a 10 per cent fall in prices in February compared with January, reflecting easing price pressures in some fresh produce categories.
At the same time, several kitchen staples continued to record price declines. Garlic inflation stood at -31.09 per cent, compared with -53.03 per cent in January, while onion prices declined -28.20 per cent, marginally less steep than the -29.30 per cent contraction recorded a month earlier. Potato prices remained in negative territory at -18.46 per cent, easing from -28.98 per cent in January.
Rural Inflation Remains Higher
Inflation patterns continued to diverge across rural and urban regions. Rural inflation rose to 3.37 per cent in February from 2.73 per cent in January, while urban inflation increased to 3.02 per cent from 2.75 per cent.
Price movements across services and household-related segments also remained under watch. Housing inflation stood at 2.12 per cent in February, below the headline CPI rate. Within this category, rural housing inflation was estimated at 2.43 per cent, while urban housing inflation was recorded at 2.00 per cent.
Inflation in clothing and footwear was 2.81 per cent, slightly lower than 2.98 per cent in January.
Price pressures across service segments were mixed. Inflation in clothing and footwear came in at 2.81 per cent, slightly lower than 2.98 per cent a month earlier. Meanwhile, restaurants and accommodation services inflation stood at 2.73 per cent, compared with 2.87 per cent in January, while health inflation eased to 1.90 per cent from 2.19 per cent.
Inflation in information and communication services edged up slightly to 0.25 per cent, compared with 0.16 per cent in the previous month.
Precious Metals Drive Sharp Price Rise
Among the items registering the steepest price increases, silver jewellery inflation surged to 160.84 per cent in February, slightly higher than 160.12 per cent in January. Prices of gold, diamond and platinum jewellery rose 48.16 per cent, up from 46.80 per cent a month earlier.
The Reserve Bank of India had earlier flagged rising precious metal prices as a factor influencing inflation in its February Monetary Policy Committee review. RBI Governor Sanjay Malhotra said the central bank’s slight upward revision in its inflation outlook was “primarily due to increase in prices of precious metals,” which contributed about 60–70 basis points to the projection, even as broader price pressures remained subdued.
Revised CPI Basket
The February reading marks the second inflation release under the revised CPI framework, which updates the base year to 2024 from 2012 and introduces a revised consumption basket reflecting changes in household spending patterns.
Under the updated structure, the combined weight of food and beverages has declined to 36.75 per cent from 45.9 per cent earlier, although it remains the largest component of the index. Food alone now accounts for 34.77 per cent.
The weight of housing, water, electricity, gas and other fuels has increased to 17.7 per cent, compared with 16.9 per cent earlier, while services categories such as transport, information and communication and household services now carry higher weights.
The revised basket also includes new items such as rural housing, OTT subscriptions, value-added dairy products and digital storage devices, while outdated goods such as VCRs and audio cassettes have been removed.
Oil Supply Risks
Inflation expectations are also being shaped by developments in West Asia, where tensions involving Iran, Israel and the United States have increased uncertainty over global oil supplies.
Shipping disruptions near the Strait of Hormuz, a critical route for global crude shipments, have raised concerns about supply bottlenecks. Nearly one-fifth of global oil trade passes through the waterway.
“We estimate that for every 10 per cent increase in crude oil prices, the WPI inflation rises by 80-100 bps, against the 40-60 bps uptick in the CPI inflation, assuming that a full transmission into Retail Selling Prices (RSPs) of fuels takes place,” said Aditi Nayar, Chief Economist at Icra.
RBI Outlook
The Reserve Bank of India has projected CPI inflation at 2.1 per cent for FY26, with Q4 inflation estimated at 3.2 per cent, and expects it to rise to 4 per cent in Q1 FY27 and 4.2 per cent in Q2 FY27 as price pressures gradually normalise.
“The slight upward revision in the inflation outlook is primarily due to an increase in prices of precious metals, which contribute about 60-70 basis points. The underlying inflation continues to be low,” the central bank said following its February policy meeting.
Earlier, V. Anantha Nageswaran, Chief Economic Adviser to the Government of India, said the revised CPI framework could improve the reliability of inflation-linked fiscal calculations. He noted that if CPI volatility declines, fiscal expenditure items such as dearness allowance adjustments and inflation-indexed bonds could become more stable and predictable.
He also added that the updated methodology improves the measurement of housing costs by extending rent data collection to rural areas and expanding sampling coverage, enabling the CPI to better capture housing expenses across regions.
The February CPI figures are provisional and may be revised in subsequent releases as additional price data becomes available, the statistics office said.
