Source The economics Times
New Delhi, January 12, 2026 — India’s retail inflation accelerated for the second consecutive month in December 2025, climbing to 1.33 % year-on-year from 0.71 % in November, government data showed on Monday. The rise was driven by price increases in several consumption categories, even as inflation remained well below the Reserve Bank of India’s (RBI) target range of 2 %–6 %.
Inflation Trends and Key Drivers
Headline retail inflation jumped to 1.33 % in December, marking its highest reading in three months and indicating a modest rebound in price pressures.
Despite the rise, inflation stayed below the RBI’s lower tolerance limit of 2 % for the fourth straight month, reflecting a prolonged period of subdued price growth across the economy.
The uptick was influenced by higher prices in categories such as personal care, vegetables, meat & fish, eggs, spices, and pulses.
Food Prices Still Deflationary
Food inflation — a major component of the Consumer Price Index (CPI) — remained in negative territory for the seventh straight month, though the pace of decline eased.
Food price inflation was down 2.71 % year-on-year in December, compared with a 3.91 % contraction in November.
Prices of vegetables, which had been steeply declining, dropped less sharply than before, subduing the overall deflation effect.
Urban vs Rural Inflation
Data showed rural inflation rising more noticeably, with headline CPI inflation increasing to 0.76 % in December from 0.10 % in November. Urban inflation also climbed to 2.03 %, up from 1.40 % the previous month, indicating broad-based price pressures in both segments.
Policy Implications
Economists say the subdued inflation backdrop gives the RBI flexibility in monetary policy. With inflation significantly below the central bank’s medium-term target of 4 %, many analysts see room for continued accommodative measures, although views differ on the magnitude and timing of future rate actions.
What This Means for the Economy
Consumers have benefited from low price growth, particularly in essential items, keeping purchasing costs relatively stable.
Policymakers remain watchful as inflation trends evolve, especially with changes to the CPI base year and upcoming economic data expected to influence future projections.
Bottom line: While the uptick in December’s retail inflation signals some pick-up in price pressures, India’s inflation trajectory continues to be muted, offering policymakers room to foster growth without immediate aggressive tightening.
