More Stories

Informist, Monday, Feb. 16, 2026

 

By Shubham Rana

 

MUMBAI – The first update to India's Consumer Price Index in 11 years has confirmed what economists and the Reserve Bank of India have been saying even under the outdated CPI basket: underlying inflation pressures in the economy are low, but they are set to rise ahead.

 

Data released last week showed retail inflation was 2.75% in January, according to the new CPI series, which uses 2024 as the base year. The Ministry of Statistics and Programme Implementation Thursday released the new CPI series, which widens coverage and tracks prices of 358 items, sharply up from 299 items in the old series. 

 

Headline inflation in January was above the lower end of the RBI's tolerance band of 2-6%, a first since June 2025. Headline inflation averaged 2.2% in 2025, according to both the new and old series. On average, there was no difference in headline inflation over the last 12 years between the two CPI series, according to Informist's calculations of the back-series data provided by the government.

 

While the headline inflation print in January was in line with expectations, the details showed a slightly different picture of retail prices compared with the December data, which was based on the 2012 CPI series.

 

Food inflation was 2.13% in January under the new series, sharply higher than 2.71?flation in December under the old series. Economists estimated the new series core inflation at around 3.4% in January, sharply down from 4.6% in December based on the old series.

 

Food prices shifted from deflation in December to inflation in January due to lower weights of vegetables and pulses. Deflation in vegetables and pulses was 5.3% in January, according to the new series, which was much lower than the over 15?flation in the old series in December. CPI food inflation in January was also driven higher by dairy products, eggs, meat, fruits, and edible oils.

 

"In the new index, while the level of food price decline appears to have prima facie corrected, the extent of underperformance has not," BofA Securities India said in a report. "As such, our underlying logic of food prices mean reverting in 2026 due to their cyclical nature remains intact."

 

Economists expect food inflation to rise in 2026-27 (Apr-Mar) with higher monthly price momentum. This comes even as the weightage of 'food and beverages' has declined to 36.8% in the 2024 series from 45.9% in the old series. "We expected food inflation to rise in the coming months and that process may have already started; this may push up volatility of headline inflation depending on how food prices evolve in the summer months," A. Prasanna, head of research, ICICI Securities Primary Dealership, told Informist.

 

Core inflation, which excludes food and fuel items, fell unexpectedly in January to 3.4% under the new series from 4.6% in December under the old series. This was on the back of lower weight for precious metals, including gold. The weight of gold jewellery has come down to 0.6% in the new series from 1.1% in the 2012 series. Economists estimate core inflation excluding gold jewellery to be even lower, at around 2%, in January.  

 

Higher prices of precious metals were one of the key reasons behind the RBI raising its near-term CPI inflation forecasts. The central bank had earlier this month raised its headline inflation forecast for the March quarter by 30 basis points to 3.2% and for FY26 by 10 bps to 2.1%. While raising inflation projections, RBI Governor Sanjay Malhotra had said that underlying inflation continues to be low.

 

"Since core is the more stable part of inflation, that being on the lower side is definitely a positive," Prasanna said. "The broad direction doesn't change, that inflation will go up going into the next financial year. Obviously, the magnitudes change a bit and core seems better behaved. So I think that's a positive."

 

With core inflation easing in the new CPI series and food inflation rising, economists now expect headline inflation to be lower in FY27 than previously estimated. Gaura Sen Gupta, chief economist at IDFC FIRST Bank Ltd., forecasts CPI inflation averaging 4.1% in FY27 based on the new series, 40 bps lower than the previous forecast based on the old series. ICICI Securities Primary Dealership projects inflation in FY27 to average around 4.0% against the previous estimate of 4.5%.

 

Even as inflation is now projected to be lower in FY27, the RBI's Monetary Policy Committee is unlikely to lower interest rates further, economists said. The Monetary Policy Committee lowered the repo rate by 125 bps in 2025 but left it unchanged at 5.25?rlier this month.

 

Inflation is projected to move to the RBI's medium-term target of 4% in FY27, and growth prospects are seen improving on the back of the lower tariffs by the US, economists said, adding that this macroeconomic scenario doesn't provide enough space for the Monetary Policy Committee to lower interest rates further.

 

Perhaps a more important development for the RBI's rate-setting panel would be the revision of the GDP series, due on Feb. 27. The GDP series base year will shift to FY23 in the new series from FY12 in the old series.

 

Chief Economic Adviser V. Anantha Nageswaran told Informist in January that the revision of the base year for calculating GDP could lift India's economic growth in FY27 close to the upper end of the Economic Survey's projection of 6.8–7.2%. India last revised the GDP base year over a decade ago, shifting it to FY12 from FY05. That revision had resulted in a sharp upward adjustment to growth estimates, with FY14 GDP growth revised to 6.9% from 4.7%. 

 

While the release of the new GDP series could be a more complex affair, the updated CPI series will make it easier for the government, the RBI, and economists to track retail price movements in the economy.  End

 

Edited by Tanima Banerjee

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.