Retail inflation inches up marginally in March but pressure is building up
Greater impact of West Asia war to be seen in coming months, food inflation could surge if monsoons are below average.
- Apr 13, 2026,
- Updated Apr 13, 2026 7:32 PM IST
Retail inflation rose marginally in March to a 13-month high but pressure is seen to be building up as the full impact of the West Asia war translates into higher fuel and commodity prices while a below average monsoon makes food products costlier.
Consumer price index-based inflation rose marginally to 3.4% in March 2026 from 3.21% in February. Consumer food price index-based rose at a faster pace to 3.87% in March from 3.47% in February. Significantly, the retail inflation data for March captures price trends in the first month of the US-Israel and Iran war and greater impact of the war is expected in April’s inflation data.
Analysts pointed out that the March inflation data showed a mild initial impact of the West Asian crisis on the headline number and inflation in the month was led by higher food and electricity and gas prices.
The concern is that while retail fuel prices may not change, pass through of higher energy prices will be felt across various commodities and sectors. Further most analysts expect global crude oil prices to remain elevated and are unlikely to fall below $90/barrel for some time.
“In March 2026, retail inflation accelerated to a 13-month high of 3.4% yoy due to fuel price hike – transmission of liquified petroleum gas (LPG), industrial diesel and premium petrol, as well as food inflation,” said India Ratings and Research.
Retail inflation in the basket of electricity, gas and other fuels rose to 1.65% in March from 0.14% in February reflecting the LPG price hike. “Consequently, inflation recorded by LPG user segment of restaurants and accommodation services also increased to 2.88% (February 2026: 2.73% and January 2026: 2.87%),” India Ratings said. It expects inflation in April 2026 to increase to 3.8%.
CPI inflation in the first quarter of the fiscal is likely to be higher than the RBI’s forecast of 4% due to high energy prices that will be passed onto the consumers and due to higher input and transportation costs, as well as gold and silver prices.
Aditi Nayar, Chief Economist, ICRA said the impact of the unrest in West Asia will continue to feed into prices of several items such as alternate fuels, airfares (owing to higher ATF prices), restaurants (owing to higher commercial LPG prices), which along with rising input prices is likely to harden the April 2026 headline inflation print. “Overall, we expect the CPI inflation to cross 4.0% in April 2026, coming back into the upper half of the MPC's medium term target range,” she said.
Food prices too are seen to build up in coming months with the IMD forecasting forecast a 92% of long-term average rainfall for this season. Inflation in food and beverages basket was at 3.71% in March from 3.35% in February 2026.
Rajani Sinha, Chief Economist, CareEdge Ratings said that there are concerns around higher probability of El Nino this year which could have adverse implications for food inflation. “We expect CPI inflation to average 4.6% in FY27, in line with RBI’s projection,” she said.
Retail inflation rose marginally in March to a 13-month high but pressure is seen to be building up as the full impact of the West Asia war translates into higher fuel and commodity prices while a below average monsoon makes food products costlier.
Consumer price index-based inflation rose marginally to 3.4% in March 2026 from 3.21% in February. Consumer food price index-based rose at a faster pace to 3.87% in March from 3.47% in February. Significantly, the retail inflation data for March captures price trends in the first month of the US-Israel and Iran war and greater impact of the war is expected in April’s inflation data.
Analysts pointed out that the March inflation data showed a mild initial impact of the West Asian crisis on the headline number and inflation in the month was led by higher food and electricity and gas prices.
The concern is that while retail fuel prices may not change, pass through of higher energy prices will be felt across various commodities and sectors. Further most analysts expect global crude oil prices to remain elevated and are unlikely to fall below $90/barrel for some time.
“In March 2026, retail inflation accelerated to a 13-month high of 3.4% yoy due to fuel price hike – transmission of liquified petroleum gas (LPG), industrial diesel and premium petrol, as well as food inflation,” said India Ratings and Research.
Retail inflation in the basket of electricity, gas and other fuels rose to 1.65% in March from 0.14% in February reflecting the LPG price hike. “Consequently, inflation recorded by LPG user segment of restaurants and accommodation services also increased to 2.88% (February 2026: 2.73% and January 2026: 2.87%),” India Ratings said. It expects inflation in April 2026 to increase to 3.8%.
CPI inflation in the first quarter of the fiscal is likely to be higher than the RBI’s forecast of 4% due to high energy prices that will be passed onto the consumers and due to higher input and transportation costs, as well as gold and silver prices.
Aditi Nayar, Chief Economist, ICRA said the impact of the unrest in West Asia will continue to feed into prices of several items such as alternate fuels, airfares (owing to higher ATF prices), restaurants (owing to higher commercial LPG prices), which along with rising input prices is likely to harden the April 2026 headline inflation print. “Overall, we expect the CPI inflation to cross 4.0% in April 2026, coming back into the upper half of the MPC's medium term target range,” she said.
Food prices too are seen to build up in coming months with the IMD forecasting forecast a 92% of long-term average rainfall for this season. Inflation in food and beverages basket was at 3.71% in March from 3.35% in February 2026.
Rajani Sinha, Chief Economist, CareEdge Ratings said that there are concerns around higher probability of El Nino this year which could have adverse implications for food inflation. “We expect CPI inflation to average 4.6% in FY27, in line with RBI’s projection,” she said.