India’s retail inflation rose to 3.40% YoY in March 2026, up from 3.21% YoY in the previous month, primarily driven by a pickup in ‘food and beverages’ inflation.

Food and beverage inflation increased to 3.7% YoY, compared with 3.4% YoY in February 2026. Within this category, the rise in inflation for ‘vegetables and pulses’ to 1.7% YoY from 0.1% YoY, along with the increase in meat inflation to 12.5% from 9.7% over the same period, were the key contributors. Inflation in other food categories, including fish, oils, and fruits, remained elevated.

Core CPI (which excludes food and fuel) remained unchanged at 3.7% YoY in March 2026, supported by higher gold and silver prices. However, core inflation excluding gold and silver remained significantly lower at 2.1% YoY, indicating subdued underlying price pressures.

We expect inflation to gradually firm up as higher energy and raw material costs, driven by the West Asia conflict, are increasingly passed on to consumers. Early signs of price revisions are emerging across FMCG, cement, paints, consumer durables, and other categories, which could add to headline inflation in the coming months. Additionally, food inflation faces upside risks from a potentially weak monsoon. Given these risks, we expect the RBI to maintain a prolonged pause in policy rates.

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