India’s Retail Inflation Rises to 3.21% in February, Still Within RBI Target

India’s retail inflation accelerated to 3.21% year-on-year in February, driven by rising prices in food, personal care products, and precious metals, according to government data. Despite the increase, inflation remains below the Reserve Bank of India’s 4% target and within the tolerance band of 2%-6%. Analysts note that soaring oil prices due to the ongoing Iran war could pose upside risks for inflation in the near term.

Food prices climbed 3.47% in February, up from 2.13% in January, while personal care products saw a 19.6% increase. Precious metals contributed significantly to inflation, with silver jewellery prices rising 161% and gold up 48.2% year-on-year. Core inflation, which excludes volatile items like food and energy, stood at 3.4%, reflecting underlying demand pressures in the economy.

Rising crude oil prices have already prompted Indian companies to increase cooking gas rates for the first time in a year, affecting both households and businesses. Economists project that if oil averages $100 per barrel through the next financial year, inflation could rise to 4.1%. The RBI has maintained interest rates in February but remains vigilant, with its next monetary policy meeting scheduled for April 6-8.

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