Retail inflation in India is estimated to have edged up to 1.66% in December 2025, from 0.71% in November, primarily due to a rise in food prices across most segments, according to projections by Union Bank of India.
The official Consumer Price Index (CPI) data for December is scheduled for release on January 12, 2026, or the next working day if it falls on a holiday.
Despite the month-on-month increase, December inflation remains well below the 5.2% recorded in December 2024, even as the favorable base effect continues to fade. Food inflation, while still in negative territory, showed signs of firming.
Union Bank expects food CPI inflation at -1.19%, compared to -2.78% in November, against a high base of 7.7% last December. Sequentially, food prices rose across most categories—excluding milk—based on on-the-ground data from the Department of Consumer Affairs.
The sharpest price increase was seen in tomatoes, driven by higher demand due to the early onset of winter and supply disruptions caused by October rains.
Meanwhile, core inflation—which excludes food and fuel—likely rose to 4.68%, supported by a renewed rally in gold prices during December.
Union Bank noted that while food inflation is expected to remain largely negative in Q3 FY26, risks persist from unseasonal winter rains and potential supply-chain disruptions.
With inflation broadly under control, the Reserve Bank of India (RBI) in December revised its FY26 CPI inflation forecast down to 2.0%, from an earlier estimate of 2.6%. Quarterly projections place inflation at 0.6% in Q3 and 2.9% in Q4, rising to 3.9% in Q1 FY27 and 4.0% in Q2 FY27—comfortably within the RBI’s 2–6% target range.
Following the December Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra described India’s macroeconomic conditions as a “rare Goldilocks period,” marked by strong growth and unusually low inflation.
The RBI also cut the repo rate by 25 basis points to 5.25%, signaling confidence in the inflation outlook. Nearly 80% of the CPI basket recorded inflation below 4%, indicating broad-based price moderation across goods and services. (ANI)
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