India’s CPI inflation stood at 3.40% YoY in Mar-26, up marginally from 3.21% in Feb-26.
Download ReportQuantEco Research || Mar-26 CPI inflation - War and weather
India’s CPI inflation stood at 3.40% YoY in Mar-26, up marginally from 3.21% in Feb-26. Notwithstanding the uptick, this marks 14 consecutive months of CPI inflation remaining below its 4% target. The financial year 2025-26 saw CPI inflation averaging at a record low of 2.1%. Exogeneous factors like benign commodity prices and two back-to-back years of surplus rainfall along with a well calibrated withdrawal of monetary and fiscal policy accommodation contributed towards this. However, the inflation trajectory for FY27 appears to be fraught with the risk of 2Ws: war and weather. The ongoing Middle East crisis has resulted in a spike in energy prices, which has started to manifest in some of the CPI items (in a limited manner for now). In addition, the likelihood of a deficiency of rainfall in the upcoming southwest monsoon season is far from comforting. The interplay between input price pressures and its degree of pass-through to output prices across industry and services would determine the eventual inflation trajectory in FY27. For now, assuming an average Brent price of USD 85 pb and a relatively less disruptive monsoon season, we project FY27 CPI inflation at 4.5%, while being cognizant of the emerging risks.