Inflation Rate in India 2026: CPI vs Rising Cost Pressures

Pankaj Singh Pankaj Singh •
Check Inflation Rate in India as of 2026 and discover why India's low 2.75% CPI in Jan 2026 masks rising WPI pressures. Moneymath analyzes the new 2024 base year, RBI rates, and sector risks.
Inflation Rate in India 2026: CPI vs Rising Cost Pressures

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As of February 19, 2026, India's macroeconomic landscape is projecting a deceptive calm. The headline Consumer Price Index (CPI) for January 2026 has printed at a remarkably benign 2.75% (Provisional), comfortably below the Reserve Bank of India’s (RBI) 4% target.

However, corporate treasurers, supply chain managers, and investors shouldn't be lulled into complacency. Beneath the sub-3% headline, upstream pressures are mounting. The Wholesale Price Index (WPI) has accelerated to a 10-month high of 1.81%, driven by manufacturing costs that signal significant pass-through risks for the first half of FY27. Here is the exclusive Moneymath breakdown of the data, the methodology changes, and what businesses need to prepare for next.

The Methodology Reset: Base Year 2024=100

January 2026 data marks a watershed moment: the debut of the new CPI series with Base Year 2024=100, replacing the outdated 2012 base. This structural shift fundamentally alters how inflation is measured and requires immediate recalibration of corporate forecasting models.

Adopting the global COICOP-2018 framework, the item basket has expanded from 299 to 358 items. Obsolete goods like VCRs and radios are out, while modern consumption staples like OTT streaming subscriptions, rural housing, and value-added dairy are in. Crucially, the volatile "Food and Beverages" weight has been slashed to 36.75% (down from roughly 46%), while "Services and Miscellaneous" now commands 33.15%.

<div class="blog-chart" data-type="pie" data-title="New CPI Weight Distribution (Base 2024=100)" data-labels='["Food & Beverages", "Services & Misc", "Housing, Fuel & Other"]' data-datasets='[{"data":[36.75, 33.15, 30.1]}]'> </div>

Moneymath Insight: Because the series are structurally different, businesses with contracts indexed to specific sub-groups (like "Food CPI" for commercial catering) must immediately renegotiate or apply the new linking factors to avoid valuation disputes.

Current Inflation Snapshot: Retail Calm vs. Wholesale Warning

While the retail environment appears stable across both urban (2.77%) and rural (2.73%) demographics, the production pipeline is signaling stress. Manufactured Products in the WPI basket are up 2.86%, indicating that producers are absorbing or preparing to pass on higher raw material costs.

<div class="blog-chart" data-type="bar" data-title="Inflation Snapshot: Jan 2026 (YoY %)" data-labels='["Headline CPI", "Urban CPI", "Rural CPI", "Food (CFPI)", "Headline WPI"]' data-datasets='[{"label":"Inflation Rate (%)", "data":[2.75, 2.77, 2.73, 2.13, 1.81], "color":"#2563eb"}]'> </div>

CPI-WPI Divergence

There is currently a 0.94 percentage point gap between retail and wholesale inflation. This is driven largely by the heavy weight of services in the CPI (Education +3.35%, Health +2.19%), which are entirely absent from the WPI.

Food Inflation Deep Dive: The Tomato Outlier

The Consumer Food Price Index (CFPI) sits at a moderate 2.13%, aided heavily by the lowered basket weight and healthy Kharif output. However, aggregate figures hide extreme volatility. While potatoes, onions, and garlic are seeing massive deflation due to strong harvests and oversupply, tomatoes have suffered a localized supply shock.

<div class="blog-chart" data-type="bar" data-horizontal="true" data-title="Food Item Inflation Volatility (YoY %)" data-labels='["Tomato", "Onion", "Potato", "Garlic"]' data-datasets='[{"label":"YoY Change (%)", "data":[64.80, -29.27, -28.98, -53.05], "color":"#EA4335"}]'> </div>

Moneymath Insight: Procurement strategies must shift from broad indexing to SKU-specific hedging. A single-commodity shock can still severely disrupt budgets.

Fuel Policy and K-Shaped Sectoral Impacts

Retail fuel prices have completely decoupled from global crude trends. While WPI Fuel dropped by 4.01% YoY due to softening global wholesale costs, CPI Transport remained sticky at +0.09%.

Why? Public Sector Oil Marketing Companies (OMCs) have used the cushion of falling crude to offset the April 2025 Special Additional Excise Duty (SAED) hike of ₹2/litre, rather than passing savings to consumers.

This creates a "K-shaped" pressure environment:

  • Primary Metals: Benefiting from lower wholesale power and fuel costs.
  • Auto, Appliances & Construction: Facing margin squeezes as Basic Metals WPI surges (+5.82% month-on-month) and downstream companies struggle to push these hikes to tapped-out retail consumers.

Monetary Policy, Liquidity, and Rate Strategy

On February 6, 2026, the RBI's Monetary Policy Committee held the repo rate at 5.25% with a Neutral stance. Despite the pause, effective financial conditions are tightening due to a structural liquidity deficit.

  • Market Reaction: Following the MPC's "prolonged pause" guidance, the 10-year G-Sec initially spiked 9 bps to ~6.75%. The subsequent drop to 6.67% post-CPI release was a technical anomaly driven by a ₹755 billion government debt switch, not a shift in core inflation sentiment.
  • The OIS Curve: The 1-year Overnight Indexed Swap (OIS) sits at 5.50% (+25 bps over repo), signaling that traders are pricing out any near-term rate cuts.

Outlook: The Path to Normalization in H1 FY27

The current sub-3% print is a statistical trough heavily aided by base effects. We forecast a normalization trajectory as those base effects wear off and producer costs transmit to the retail level.

<div class="blog-chart" data-type="line" data-title="Inflation Trajectory Outlook (FY26-FY27)" data-labels='["Q4 FY26", "Q1 FY27", "Q2 FY27"]' data-datasets='[{"label":"Projected CPI (%)", "data":[3.2, 4.0, 4.2], "color":"#FBBC04"}]'> </div>

Indonesia serves as a timely cautionary tale: their January 2026 headline CPI jumped to 3.55% from 2.92% almost entirely due to expiring base effects from electricity subsidies. India will face similar mathematical spikes in Q4 FY26.

The Bottom Line: Corporate treasuries should view this low-inflation window as temporary. Focus on locking in term funding and hedging specific commodity risks (like precious metals, which saw silver jewellery rocket 159.67% YoY) rather than positioning for aggressive rate cuts.

Sources & References