India’s retail inflation rose slightly in December but remained well below the Reserve Bank of India’s target range. Official data released on Monday showed that annual retail inflation increased to 1.33 percent in December from 0.71 percent in November. This was the fastest rise in three months, though still lower than market expectations of around 1.5 percent.
Importantly, inflation stayed below the RBI’s target band of 2 percent to 6 percent for the fourth consecutive month, underlining the continued softness in price pressures across the economy.
Food prices, which have been the main reason for low inflation in recent months, continued to fall but at a slower pace. Food inflation stood at minus 2.71 percent in December, compared with a sharper fall of 3.91 percent in November. Vegetable prices dropped 18.47 percent year-on-year, easing from a decline of over 22 percent in the previous month.
Economists say the worst of the disinflation phase may now be over. Inflation is likely to move up gradually in the coming months but is expected to remain below 4 percent until at least mid-2026.
While tax cuts on consumer goods are helping keep prices in check, some risks remain. Uncertainty around a possible trade deal with the US has weighed on the rupee, which fell 4.7 percent in 2025 — its steepest annual decline in three years. A weaker currency can make imports costlier and add to inflationary pressure.
Core inflation, which excludes food and fuel and reflects underlying demand, rose to around 4.6 percent in December from about 4.3 percent in November, according to economists. Firm gold prices have been one factor pushing core inflation higher.
The combination of low inflation and strong economic growth prompted the RBI to cut interest rates by 25 basis points last month. Some economists now expect another rate cut when the central bank announces its next policy decision on February 6.
December’s data will be the last under the current inflation series, as India moves to a new consumer price index with 2024 as the base year from next month.
