According to recent data from the Ministry of Statistics and Programme Implementation (MoSPI), India’s inflation rate, as measured by the Consumer Price Index (CPI), increased to 3.4% in March. This rise is attributed to the limited and localized effects of the ongoing conflict in West Asia.
The March inflation rate of 3.4% represents a slight uptick from February’s figure of 3.21%. Notably, food inflation accelerated significantly, reaching 3.87%, compared to 3.47% the previous month.
Inflation reflects the change in prices from one month to the same month in the previous year. While the overall inflation figures for March were comparable to those of February, a significant increase was observed in the ‘electricity, gas, and other fuels’ category, which rose to 1.65% from just 0.14% in February.
The ongoing conflict in West Asia has had a global impact on energy prices, with India’s crude oil basket witnessing an over 60% increase in March compared to February. Despite this surge, consumers have not experienced higher petrol and diesel prices at the pump, as oil marketing companies have maintained their pricing. However, the government did raise the price of domestic LPG cylinders by Rs 60 earlier in March, and kerosene prices have also seen an increase.
As consumers remain somewhat insulated from the heightened energy prices resulting from the conflict involving the US and Israel against Iran, the inflationary effects are expected to be more pronounced in the Wholesale Price Index (WPI) data for March, which is scheduled for release by the commerce ministry on Tuesday.
In February, WPI inflation was recorded at 2.13%, with ‘fuel and power’ costs falling by 3.78% compared to the previous year. Economists from Union Bank of India, led by Kanika Pasricha, predict that India’s wholesale inflation may have climbed to 3.08% in March, marking the highest rate in nearly two years.
Typically, increases in wholesale prices are reflected in consumer prices after some delay. Even if oil marketing companies do not adjust petrol and diesel pump prices, various sectors—including consumer durables, paints, and fast-moving consumer goods—have begun to pass higher costs onto consumers. These price hikes stem not only from rising fuel costs but also from increases in petrochemical by-products, such as plastics used in packaging and other applications.
While the marginal increase in CPI inflation for March may provide some reassurance to policymakers, close monitoring of price developments will be essential, especially following the unsuccessful peace talks in Islamabad. Last week, the Reserve Bank of India (RBI) opted to keep its policy repo rate unchanged at 5.25%, projecting an average inflation rate of 4.6% for 2026-27, which is more than double the rate anticipated for 2025-26. Additionally, the RBI forecasts a decline in GDP growth to 6.9% for the current fiscal year, down from 7.6% for the year ending in March.
Siddharth Upasani serves as a Deputy Associate Editor at The Indian Express, focusing primarily on economic data and trends. He has previously worked at Moneycontrol and the financial newswire Informist. Outside of his professional responsibilities, he enjoys sports, fantasy football, and graphic novels.
