NEW DELHI — India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 1.33% in December 2025, according to data released by the National Statistical Office (NSO) on Monday. While this marks a three-month high—up from 0.71% in November—it remains well below the Reserve Bank of India’s (RBI) medium-term target of 4%.
The current trend reflects a unique economic environment where persistent deflation in food items is being offset by rising costs in personal care, primarily driven by precious metals.
1. Key Inflation Indicators (December 2025)
The latest figures highlight a stark contrast between rural and urban sectors, with urban areas feeling more price pressure.
| Metric | Value (Dec 2025) | Value (Nov 2025) |
| Headline CPI (Combined) | 1.33% | 0.71% |
| Food Inflation (CFPI) | -2.71% | -3.91% |
| Rural Inflation | 0.76% | 0.10% |
| Urban Inflation | 2.03% | 1.40% |
| Core Inflation | 4.60% | 4.30% |
2. Why Food Prices are Falling
Food items, which make up roughly 39% of the CPI basket, remained in the negative zone for the seventh consecutive month.
- Vegetables & Pulses: These categories saw significant contractions of 18.5% and 15.1% respectively, thanks to a robust harvest and stable supply chains.
- The “Base Effect”: High food prices in December 2024 (which stood at 8.39%) created a high statistical base, making current prices look lower by comparison.
- Upward Pressures: While overall food is cheaper, items like meat, fish, and eggs saw modest price increases, preventing the headline number from dipping further.
3. The Shift to a New Base Year (2024)
The NSO confirmed that the December release is the final one using 2012 as the base year.
- The Change: Starting February 12, 2026, inflation data will be calculated using 2024 as the new base year.
- Why it Matters: The new series will incorporate updated consumption patterns from the 2023-24 Household Expenditure Survey, including data from e-commerce platforms and 280 additional markets. This is expected to provide a more accurate reflection of modern Indian spending.
4. What This Means for Interest Rates
The RBI’s Monetary Policy Committee (MPC) recently cut the repo rate to 5.25% in December 2025. With inflation consistently staying below 4%, economists are debating the next move.
- MPC Outlook: The RBI expects inflation to gradually rise toward 3% and 4% throughout 2026 as base effects fade.
- Expert View: Many analysts believe the RBI will hit “pause” in its February meeting to evaluate the impact of the new 2024 base year and the upcoming Union Budget.