India’s inflation rate has risen to the highest in eight months under the new CPI series to fall within the Reserve Bank of India’s tolerance band for the first time since August 2025. That indicates a status quo on repo rate in the longer term.
India’s new Consumer Price Index surged to 2.75% in January 2026 as against 1.3% in December 2025, when the old CPI series was in effect, according to data released by the Union Ministry of Statistics and Programme Implementation on Thursday. A Bloomberg survey of economists had pegged the figure at 2.77%.
The food inflation rate was 2.13%, according to MOSPI.
The new Consumer Price index cuts the weight of volatile items such as food to about 36.8% from nearly half and shifts the base year to 2024 from 2012. The prices have also been collected nationwide. New categories, such as rentals for rural housing, have been added.
The upgraded CPI will also track spending in areas such as online shopping, dining out and streaming services including Amazon and Netflix.
The overhaul comes amid scrutiny of the RBI’s inflation forecasting model after it consistently overestimated price pressures, potentially contributing to a hawkish policy stance.
To be sure, India’s inflation rate is still below the RBI’s 4% target. The revised CPI series could temper expectations of further repo rate cuts. RBI Governor Sanjay Malhotra left the benchmark unchanged last week and signaled that policy is likely to remain on hold for an extended period.
Inflation in the Indian economy is also under check due to the GST rationalisation last year, even as recent trade deals improve market sentiment.
The India economy is projected to grow at 7.4% in the financial year through 31 March 2026 and over 7% in the next financial year.
Analysts’ Take
Radhika Rao, Senior Economist at DBS Bank Singapore: “There were a few unknowns in the revised CPI series, especially the impact of methodological changes on the headline.
“The revised inflation series carried a modest upside bias compared to the older base, with firmer food likely to have offset by a more subdued read on core inflation.”
Madhavi Arora, Chief Economist at Emkay Global: “We do not expect the new inflation series to materially influence policy in the near term. An extended rate pause looks likely, underpinned by a cyclical upturn in both growth and inflation and improving confidence following the conclusion of the India-US trade talks.”
