January retail inflation at 2.75% in first print under new CPI series

Inflation for January

• India updates CPI base year to 2024, first major revision in over a decade
• Food's weight in CPI drops below 40%, non-food categories exceed 60%
• New CPI basket covers 350+ items, reflecting changing consumption patterns

Did our AI summary help?

India’s retail inflation stood at 2.75 percent in FY26 under the newly released Consumer Price Index (CPI) series, compared with 1.33 percent (under the old series) in the previous month, according to data announced on February 12. The release marks the first major revision of India’s retail inflation series in over a decade, with the base year updated to 2024 from 2012.

Inflation had begun firming up toward the end of last year, rising to 1.33 percent in December from 0.71 percent a month earlier under the previous series.

The new series shows that prices have been rising sequentially for three straight months, as the index rose to 104.46 in January from 104.10 in December and 104.01 in November.

A key shift in the revised CPI is the reduced dominance of food. Food’s weight has fallen below 40 percent for the first time, while non-food categories now account for over 60 percent of the index, up from roughly 45 percent earlier. At the same time, rural consumption has been given a higher effective weight, reflecting its growing contribution to overall demand.

Food inflation under the revised series rose to 2.13 percent, though its overall impact on headline inflation is expected to be lower than in previous series because of the reduced weighting.

Food and beverages that account for 37 percent weight in the index had an inflation rate of 2.11 percent, as tomato inflation hit a high of 64.8 percent.

Coconut and coconut oil inflation also remained in high double digits.

Personal care inflation, which includes gold and silver jewellery, was a high 19.02 percent, as silver jewellery inflation was 160 percent, while gold inflation was 47 percent.

Education services was 3.35 percent, while restaurants and accommodation services also higher than national average at 2.87 percent.

The new CPI basket has also expanded significantly, covering more than 350 items compared with 299 earlier, alongside wider price collection across markets. Newly added items include wireless earphones such as AirPods, pet food, sanitizers, fitness bands and air purifiers — additions intended to capture evolving consumption patterns shaped by urbanisation, higher disposable incomes and post-pandemic health awareness.

"Core items (excluding food, fuel segments) which now have a higher weight in the new series had majority of the prices being around 3% (reflecting the impact of GST rate rationalization) barring personal effects. The personal effects inflation stood at 19.0% in January 2026 led by significantly high inflation in jewellery items," said Paras Jasrai of India Ratings and Research.

Category weights have also shifted. Housing, water, electricity, gas and other fuels now account for 17.7 percent of the index, up from 16.9 percent earlier. Health services have edged up to 6.1 percent from 5.9 percent, while transport and communication have risen more sharply to 12.4 percent from 8.6 percent, reflecting increased mobility, digital connectivity and service usage.

The revised series is expected to make inflation readings somewhat less sensitive to short-term food price volatility while highlighting trends in services, housing and discretionary consumption more clearly.

RBI to stay on hold

Economists noted that the central bank is likely to stay on hold for this fiscal.

"The CPI inflation came in line with expectations. While details are still awaited the core inflation looks significantly lower than our expectations. While inflation trajectory remains fairly benign, we believe RBI’s rate cutting cycle has come to an end, with the RBI likely to continue to hold rates on pause for an extended period through CY26 at least," said Upasna Bhardwaj from Kotak Mahindra Bank.

Reiterating the view Jasrai highlighted that inflation is likely to climb to 3.2 percent in February 2026.