​Price pressures: On new series of Consumer Price Index, inflation

The new series of the Consumer Price Index (CPI), the second data release of which was issued on Thursday, does not yet have enough historical data for robust comparisons, but does include enough information to provide clues about the future. Retail inflation in India quickened to a 10-month high of 3.2% in February 2026, largely driven by food inflation and precious metal prices. This rise is something that the government should take note of early, avoiding any complacency that might have crept in due to the low inflation levels of the last year or so. Food has a lower weight in the new series as compared to the old one, but is nevertheless a major driver of inflation with a 36.75% weight in the overall CPI. Inflation in food and beverages rose to 3.35% in February from 2.1% in the previous month, driven by quickening price levels in the meat, oils, and fruits and nuts categories. Notably, inflation in tomato prices stood at more than 45%. Thankfully, this was accompanied by a contraction in prices of the two other staples — onions and potatoes — by 28% and 18%, respectively. A large part of the low inflation last year was due to a statistical base effect that is now gone. Looking ahead, there are various factors that could result in rapidly rising food inflation. The first is that climate scientists are predicting the return of the El Niño effect in the middle of the monsoon this year. A weak monsoon will naturally raise food prices. The second impact will depend on how long the conflict in West Asia continues. Sustained natural gas supply constraints will hurt fertilizer production, affecting food output and, eventually, prices.

The other factor that has driven inflation up, and which will likely remain a major driver in the near future, is the price of gold and silver. Gold jewellery saw inflation rise to 48.2% in February from an already-blistering 46.8% in January. Inflation in silver jewellery stood at more than 160% in both January and February. With global uncertainty and anxiety skyrocketing, the demand for safe-haven precious metals is not going to let up any time soon. Rising oil prices and LPG and LNG shortages are already raising input prices for industry, which will eventually be passed on to consumers. The Reserve Bank of India’s Monetary Policy Committee has a tough job in its next meeting in April. Inflation is being driven by supply constraints, so trying to reduce demand by raising interest rates will not only have a minimal impact on inflation but could also further hurt growth when fuel constraints are already impacting it. The onus lies with the government and its efforts to expedite alternative sources of fuel.