Food inflation picked up to 1.41% in January after remaining flat at 0.00% in December.
A Reuters poll of economists had projected wholesale price index (WPI)-based inflation, which has not been rebased, to accelerate modestly to an annual 1.25% from 0.83% in December.
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India’s retail inflation climbed to 2.75% in January 2026, driven by higher food and precious metal prices, according to the first print of the revised Consumer Price Index (CPI) series with 2024 as the base year. Inflation stood at 2.73% in rural areas and 2.77% in urban areas.
Primary articles inflation accelerated to 2.21% in January, up from 0.21% in December. Fuel and power inflation remained in negative territory at 4.01% in January, compared with a contraction of 2.31% in December.
Manufactured products inflation inched up to 2.86% in January from 1.82% in December. The month-on-month change in the WPI for January stood at 0.51%, compared with December.
Kitchen staples
Vegetable prices in January rebounded, rising 6.78% year-on-year compared with a 3.50% contraction in December. Onion prices remained in deflation but the pace of decline eased sharply to 33.42% in January from a 54.40% drop in December. Potato prices continued to slide, contracting 38.84% in January, slightly steeper than the 38.21% year-on-year decline recorded in December.
Cereal prices stayed in contraction for the fourth straight month, declining 1.41% year-on-year in January compared with a 1.18% drop in December. Meanwhile, pulse prices fell 11.05% in January, easing from a 13.88% decline in December.
Milk prices rose 2.51% year-on-year in January, lower than the 3.23% increase recorded in December.
RBI outlook and policy stance
In its latest review, the Monetary Policy Committee (MPC) of the Reserve Bank of India signalled a recalibration of its inflation outlook, moving away from the earlier assumption that price pressures would steadily soften through FY27.
The central bank has raised its projections for consumer price inflation in the first half of FY27, now estimating it at 4% in Q1 and 4.2% in Q2, slightly above its previous forecasts.
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For FY26, the MPC has revised its numbers as well. It now sees headline inflation averaging 2.1% for the year, with Q4 inflation at 3.2%.
In contrast, its December assessment had placed Q4 FY26 inflation at 2.9%, followed by projections of 3.9% in Q1 and 4% in Q2 of FY27.
At that time, the committee had cut its FY26 inflation estimate to 2% from 2.6% projected in October, reflecting a stronger disinflation trend.
Recent data and evolving price dynamics, however, have led to a reassessment and a modest upward revision in the outlook.
On rates, the Reserve Bank of India opted to keep policy settings unchanged, holding the benchmark repo rate at 5.25% and retaining a neutral stance. The move signals policy continuity as the central bank monitors shifting domestic and global conditions.
The decision comes against the backdrop of increased public spending under the Union Budget and progress on trade negotiations with the United States and the European Union, developments that have strengthened the growth outlook.
The RBI has also nudged up its real GDP growth projection for 2025–26 to 7.4%, slightly higher than its earlier estimate.
While it has flagged the possibility of slower momentum later in the year, the revised forecast remains above both its earlier quarterly path and the government economic adviser’s growth estimate of 6.8%–7.2% for the upcoming fiscal year.