India’s retail inflation stood at 3.48% in April as prices of food and beverages, clothing, housing and utilities firmed up amid rising energy costs linked to the West Asia conflict, according to provisional data released by the Ministry of Statistics and Programme Implementation on Tuesday.
The increase pushed inflation to a 13-month high in April, following a 10-month high recorded in February. A Mint poll of 20 economists had projected median retail inflation at 3.8% for April.
The favourable base effect that had helped keep inflation subdued in recent months continued to weaken.
The latest Consumer Price Index (CPI) data cannot be compared with the year-ago period due to the reset of the index basket in January. Retail inflation was recorded at a revised 2.74% in January, marking the debut of the new series with 2024 as the base year. It subsequently rose to 3.21% in February and 3.4% in March.
Despite the latest rise, inflation remains below the Reserve Bank of India’s medium-term target of 4%, even as inflationary pressures linked to the war continue to build.
The RBI kept interest rates unchanged at its meeting on April 8, adopting a cautious approach while monitoring the impact of elevated oil prices on the economy and currency stability.
The central bank’s six-member Monetary Policy Committee voted unanimously to retain the benchmark repo rate at 5.25%, while maintaining a neutral policy stance and signalling a wait-and-watch approach.
The conflict in West Asia has weighed on the Indian economy, contributing to pressure on the currency and increasing stagflation concerns.
In his address, RBI Governor Sanjay Malhotra acknowledged the recently announced ceasefire between Iran and the US, but warned that ongoing global supply chain disruptions continue to pose risks to India’s growth and inflation outlook. The collapse of talks between the US and Iran has added to uncertainty.
With key state elections now over, investors are increasingly concerned that a possible rise in retail fuel prices could further intensify inflationary pressures.
Brent crude oil has remained above $100 a barrel for much of the past two months, although the government has so far refrained from increasing domestic petrol and diesel prices.
As inflation rises, India’s economic growth is also projected to slow.
Real gross domestic product (GDP) is estimated to grow by 7.6% during 2025-26, according to the Second Advance Estimates (SAE) of the new GDP series with 2022-23 as the base year.
The RBI expects GDP growth to moderate to 6.9% in FY27. The Asian Development Bank has also projected growth at 6.9% for the current fiscal year, while the World Bank has estimated India’s GDP growth at 6.6%.
Under the old CPI series, which used 2012 as the base year, inflation had stood at 1.33% in December and 0.71% in November.
Food items account for a significant share of the CPI basket, making headline inflation highly sensitive to fluctuations in food prices.
From June 2025, food inflation turned negative, with prices remaining lower than the previous year. This sharply pulled down headline CPI inflation, which fell to a record low of 0.25% in October 2025 alongside food inflation of -5.02%.
The new CPI index, based on spending patterns captured in the 2023-24 Household Consumption Expenditure Survey, uses 2024 as the base year.
The recalibrated weights under the new CPI series have modestly increased headline inflation readings, with the share of core items rising by around 10 percentage points and the influence of volatile food prices reduced.
The revised series also increases the weight of housing, reshaping the way inflation is measured, reducing volatility and changing how the RBI interprets headline inflation trends.
According to the current framework, the updated CPI series gives policymakers a more contemporary basis for evaluating real incomes, consumption patterns and purchasing power. The reduced weight of food and beverages may also make headline inflation less volatile going forward.
