India’s retail inflation increased to 2.75% YoY in January 2026 under the new CPI series, compared with 1.33% YoY in the previous month under the old series. The base year for the revised series has been updated to 2024 from 2012 in the earlier series. The weight of ‘Food and Beverages’ has declined by ~9 percentage points in the new series, while the weight of services has increased, with separate heads for ‘information & communication’ and ‘restaurants & accommodation’.

In January 2026, inflation remained moderate across most major categories, except for the personal care+ segment, which was lifted by rising precious metal prices. In food, vegetable & pulses prices continued to register deflation. Onion and potato prices recorded a sharp year-on-year decline, while tomato prices posted a strong increase. Other food categories, such as meat, fish, fruits, and oils, witnessed elevated inflation.

We expect inflation to remain anchored around 4% target in FY27. However, a sustained increase in commodity prices, weak kharif output and potential El Niño (negative for the monsoon) pose upside risks to the inflation trajectory.  We see scope for at most one additional rate cut, provided the inflation trajectory remains benign.

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