March CPI Outlook: Inflation May Rise Slightly, Iran-US War Could Lock India Into 'Sticky' Inflation Cycle

March CPI Inflation Expectation: The consumer price index (CPI) inflation, also known as retail inflation, in March may edge up but will remain below the Reserve Bank of India (RBI) target band. Ongoing geopolitical tensions due to the Iran-US war may push up fuel costs and even raise the risk of another round of food price pressures, according to experts.

If the Iran-US conflict persists, higher transport and input costs could seep into core categories and push inflation in the coming months. The risk has intensified after recent diplomatic talks failed to yield a peace agreement.

Crude oil price hike impact was partially absorbed by the government and oil marketing companies (OMCs), but "the impact on core inflation will be felt via higher energy, trade and transportation costs, along with rising inflation expectations," according to a CRISIL report.

The government is scheduled to release the Consumer Price Index-based retail inflation data for March on Monday, April 13. The CPI inflation increased to 3.2% in March 2026. The surge was driven by inflation in the food and tobacco categories.

March CPI Inflation Expectations

Inflation is expected to rise to 3.4% from 3.21% in February, according to a Bloomberg report. The retail inflation data, due for release on Monday, will be followed by the wholesale price index (WPI) inflation data on Wednesday.

A host of factors, including rising fuel costs, uncertainty around rainfall, volatile vegetable cycles, and supply shocks due to geopolitical tensions, may impact retail inflation in India in March.

"India's CPI inflation for March 2026 is expected to edge up modestly to around 3.4% year on year, from February's 3.21%, remaining comfortably within the RBI's target band but still shaped by familiar risks. Food inflation, which rebounded to 3.47% in February after late 2025 deflation, is likely to stabilise near 3%, though uncertainty around rainfall, volatile vegetable cycles, and persistent storage and transport bottlenecks could quickly push prices higher," explained Rajeev Sharan, Head of Research, Brickwork Ratings.

The RBI has fixed an inflation target at 4% with an upper tolerance level of 6% and a lower tolerance level of 2%. "The RBI projects inflation at 4.5% in FY26, which sits comfortably within its 4% ± 2% target band. So overall, things are slowly cooling off. That said, food prices are still on the higher side, around 6-8%," Gaurav Maheswari, CFO, Alankit Limited.

Worst Hit Sectors Due To Inflation Amid Iran-US War

Sectors like aviation, refining, and chemicals would feel the immediate heat of the crude oil price rally driven by the Iran-US war, believes Sharan.

"Transport and logistics firms would see costs rise sharply, feeding into higher prices for everything from cement to consumer goods. Food supply chains could also come under strain if fertiliser and fuel costs jump, raising the risk of another round of food price pressures. Manufacturing sectors that rely on imported inputs, like, metals, plastics, electronics, etc. would face thinner margins and slower output," Sharan added.

Risk Of Sticky Inflation

While the West Asia crisis is having an immediate impact to our daily lives with LPG supply disruption, risk of rising petrol and diesel prices, etc, the Iran-US war led price shock can seep into core categories.

"For India, this implies elevated logistics and commodity costs could persist well into the second quarter, nudging inflation away from the comfort of the RBI's target band. The risk lies less in the initial shock and more in its persistence: if higher transport and input costs seep into core categories, the economy could shift from a 'transitory' disturbance toward a more 'sticky' inflation regime. A 5% plus CPI baseline for 2026 cannot be ruled out in the absence of aggressive supply-side interventions and tighter monetary conditions," explained Sharan.

"As of now, we see the conflict largely peaking in 1QFY27, with our inflation forecast tracking that of the RBI at 4.6%, with Brent at an average of USD80/bbl. We will be watchful of the system liquidity ahead," as per Emkay Research.