India’s consumer inflation rises to 3.21% in February as oil risks loom

The headline inflation number was in line with economists’ expectations for a 3.1% rise in the consumer price index, according to a Reuters poll.

Food inflation rose 3.47% year-on-year in February, also up from a 2.13% rise in January, India’s Ministry of Statistics and Programme Implementation said in a release Thursday.

This is the second consumer price index reading under a revised data series, with the base year changed to 2024 from 2012 to reflect changes in consumption patterns.

The base year was changed because “significant structural changes have occurred in consumption behaviour, income levels, urbanisation, expansion of the services sector, and digitalization,” the government said in a statement in February.

India’s central bank expects inflation for the current financial year to be 2.1%, it said at its last monetary policy meeting on Feb. 5, adding that food supply prospects “remain bright” in the near term.

However, experts said that while inflation will remain within the Reserve Bank of India’s 2% to 6% target range, it is unlikely to trigger policy action owing to the escalating conflict in the Middle East.

Currently, around 30% of India’s crude oil supplies and 90% of LPG imports transit through the Strait of Hormuz, the government said in a note on Wednesday.

While households are not yet facing a shortage of cooking fuel, prices have risen. Many hotels and restaurants in the country that use commercial LPG cylinders are facing closure as supply has been diverted to households.

India’s “Goldilocks narrative of strong growth and low inflation” has continued under the new GDP and CPI series but is “challenged by higher crude oil prices and fuel shortages,” global brokerage Nomura said in a report on Wednesday.

It added that “elevated oil prices” caused by disruptions in the Middle East are likely to curb the Reserve Bank of India’s dovishness. “We expect a policy [rate] hold from here on,” the report said.

Global oil prices have risen sharply since the start of the U.S.-Israel war in Iran, with Brent crude touching $100 a barrel earlier today.