NEW DELHI: Retail inflation rose to a three-month high of 1.33 per cent in December, mainly due to higher prices of food items, but remained below the Reserve Bank of India’s lower tolerance level.
The Consumer Price Index (CPI) based headline inflation was 0.71 per cent in November and 5.22 per cent in December 2024. The inflation stood at 1.44 per cent in September.
The food inflation in December was (-) 2.71 per cent, and remained negative for the seventh consecutive month.
“The increase in headline inflation and food inflation during the month of December 2025 is mainly attributed to an increase in inflation of personal care and effects, vegetables, meat and fish, egg, spices and pulses and products,” the National Statistics Office (NSO) said while releasing the CPI data.
The headline inflation in urban areas was higher at 2.03 per cent compared to 0.76 per cent in rural India.
The retail inflation remained below the Reserve Bank of India’s lower tolerance limit for the fourth consecutive month in December.
The government has mandated the central bank to ensure inflation remains at 4 per cent, with a margin of 2 per cent on either side.
According to the NSO data, the top five major states with high inflation during December were Kerala (9.49 per cent), Karnataka (2.99 per cent), Andhra Pradesh (2.71 per cent), Tamil Nadu (2.67 per cent), and Jammu and Kashmir (2.26 per cent).
On the other hand, retail inflation was negative in Assam, Bihar, Haryana, Madhya Pradesh,
Odisha, and Uttar Pradesh.
Aditi Nayar, chief economist, Icra, said the retail inflation expectedly rose to 1.3 per cent in December 2025 from 0.7 per cent in November, while printing marginally lower than Icra’s estimate of 1.4 per cent for the month.
The uptick was driven by narrower deflation in the food and beverages segment, as well as hardening inflation in the miscellaneous items, she said.
“While the December 2025 MPC minutes suggest a possibility of another rate cut in February 2026, Icra believes that a pause is warranted at the current juncture. Besides, it would be prudent to wait and assess the updated CPI (base: 2024) and GDP (base: 2022-23) series, which are due to be released later in February, as these will determine the current growth-inflation mix and aid in forming a fresh outlook,” Nayar said.
Dipti Deshpande, principal economist, Crisil, said the uptick was driven by food, where deflation narrowed as the high base effect gradually waned.