CPI inflation edges up in March as food prices firm and global energy risks emerge; remains within RBI comfort range
India’s retail inflation rose to 3.4 per cent in March, driven by higher food prices and emerging pressure from global energy markets amid escalating tensions in West Asia, while remaining within the Reserve Bank of India’s (RBI) comfort range.
Data released by the Ministry of Statistics and Programme Implementation showed headline Consumer Price Index (CPI) inflation at 3.40 per cent year-on-year in March, up from 3.21 per cent in February. Rural inflation stood higher at 3.63 per cent, while urban inflation was at 3.11 per cent.
Food inflation, which carries the highest weight in the index, rose to 3.87 per cent from 3.47 per cent a month earlier. Rural food inflation was at 3.96 per cent and urban at 3.71 per cent.
“Increase in inflation in March to 3.4 per cent is on expected lines and mainly reflects higher food inflation and gold prices. There was also some impact of higher LPG prices,” said Rajani Sinha, Chief Economist, CareEdge Ratings.
However, several essential kitchen items remained in deflation. Onion prices fell 27.76 per cent, potatoes declined 18.98 per cent, while garlic prices remained negative at minus 10.18 per cent. Pulses such as arhar (tur) and peas also stayed in negative territory.
“The data indicate that higher energy and fuel-related costs are beginning to exert upward pressure, even as food inflation remains broadly manageable. Overall, the inflation print suggests that macroeconomic stability is intact, but volatility in crude oil markets calls for continued vigilance,” said Vikrant Chaturvedi, Associate Director – Research, Brickwork Ratings.
Policy Outlook And Risks
The inflation reading comes against a backdrop of rising geopolitical tensions involving Iran, Israel and the United States, raising concerns over potential disruptions to global oil supplies. Any sustained increase in crude prices could feed into domestic inflation through fuel and transport costs.
“The CPI inflation came in line with our expectations. We expect the trajectory to trend higher, while remaining watchful of risks from sub-par monsoons, second-order pass-through of higher input prices and a weakening INR. However, we expect the RBI to maintain status quo on rates in the foreseeable future,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.
Mixed Trends Across Categories
Beyond food, inflation trends remained uneven. Housing inflation stood at 2.11 per cent in March, while clothing and footwear inflation was recorded at 2.75 per cent.
Services segments saw mild increases, with restaurant and accommodation services inflation at 2.88 per cent and education at 3.30 per cent. Health inflation remained subdued at 1.75 per cent, while transport inflation was largely flat.
At the same time, discretionary segments recorded sharper increases, with personal care and miscellaneous goods and services inflation remaining elevated at over 18 per cent.
Precious Metals And State Variation
Among individual items, precious metals continued to dominate. Silver jewellery prices surged 148.61 per cent year-on-year in March, while gold, diamond and platinum jewellery prices rose 45.92 per cent. Items such as copra, tomatoes and cauliflower also recorded elevated inflation.
At the state level, inflation trends remained uneven. Telangana recorded the highest combined inflation at 5.83 per cent, followed by Andhra Pradesh and Karnataka.
RBI Stance And Data Reliability
At its recent policy review, the RBI maintained that domestic macroeconomic fundamentals remain strong while flagging external risks.
“The fundamentals of the Indian economy are on a stronger footing, providing it with greater resilience to withstand shocks now than in the past. The economy is confronted with a supply shock. It is prudent to wait and watch the evolving growth-inflation outlook,” RBI Governor Sanjay Malhotra said.
The government said price data for March was collected from 100 per cent of rural and urban markets, ensuring near-complete reporting. The CPI series, with 2024 as the base year, reflects updated consumption patterns across physical and online markets.
“Looking ahead, CPI is expected to remain within a manageable range in the near term, supported by continued moderation in key food items. However, upside risks persist from supply-side shocks and international commodity prices. The overall trajectory will depend on monsoons, global input costs and domestic demand conditions,” said Ranjeet Mehta, Secretary General and CEO, PHDCCI.
