India’s retail inflation edged up in February as food prices rose and global oil markets turned volatile amid escalating geopolitical tensions. Economists warn that if crude prices remain elevated, inflationary pressures could intensify in the coming months, posing fresh challenges for policymakers.
Food inflation rose to 3.47 percent year-on-year in February, up from 2.13 percent in January, according to the latest data. The increase reflects a gradual rise in prices of several essential food items after a period of relative stability.
The ongoing conflict in the Middle East has also added to inflation concerns. The war pushed global oil prices sharply higher earlier this week, raising fears that energy costs could feed into domestic prices in oil-importing countries such as India.
A sustained increase in inflation could have broader implications for the economy. Higher prices erode household purchasing power and may slow consumption, a key driver of India’s growth. Rising inflation could also limit the room for the Reserve Bank of India to ease interest rates, as the central bank prioritises price stability within its 2 percent to 6 percent inflation tolerance band.
The pressure on prices is also beginning to show in household energy costs. Indian companies have raised cooking gas prices for the first time in about a year, reflecting higher global energy costs.
Despite the recent uptick, Finance Minister Nirmala Sitharaman said earlier this week that the government does not expect a sharp surge in inflation, noting that overall price levels remain close to the lower end of the central bank’s target range.
However, a recent government report cautioned that a prolonged conflict in the Middle East could weaken the Indian rupee and widen the country’s current account deficit, increasing macroeconomic risks.