India Retail Inflation Likely Rose To 1.66% In December - Here's Why

(MENAFN- Live Mint) India's retail inflation likely saw a marginal increase in December 2025, reaching 1.66% compared to the 0.71% recorded in November, according to a report by Union Bank of India seen by ANI. The bank stated that the rise was primarily driven by strengthening food prices across most segments of the food inflation baske.

Even so, retail inflation, as measured by the Consumer Price Index (CPI) remained well below 5.2% recorded in December 2024, despite the base effect gradually losing steam.

The projections come ahead of the release of India's retail inflation (CPI) data for December 2025, scheduled for 12 January, 2026, or the next working day if the date happens to be a holiday.

Core inflation gains momentum on rising gold prices

Meanwhile, the core inflation, which typically excludes food and fuel, likely rose to 4.68% as gold prices resumed their rally through the month of December.

Food inflation probably continued to be negative in December, even as month-on-month food price were up across most of the food segments, ANI reported.

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“We expect food CPI to print -1.19% as against -2.78% last month and a high base of 7.7% last Dec. Sequentially, food inflation has gone up as food prices across the board (barring a few segments like milk) gained further momentum during the month as indicated by the on-the-ground (OTG) prices collected from the Department of Consumer Affairs,” the Union Bank of India report read.

According to the report, tomatoes recorded the highest price gain, as an early onset of winter boosted demand while October rains impacted the supply.

“Food inflation is expected to remain largely negative in Q3FY26; however, there remains an upside risk from unseasonal winter rains and consequent supply chain disruptions,” the Bank's report read.

RBI adjusts forecasts of CPI inflation

Reflecting the current trend of controlled inflation, the Reserve Bank of India (RBI) in December revised its CPI inflation forecast for 2025-26 to 2.0%, down from its previous estimate of 2.6%, according to ANI.

Quarterly projections show inflation at 0.6% in Q3 and 2.9% in Q4, before rising to 3.9% in Q1 2026-27 and 4.0% in Q2, which still falls within the central bank's 2-6% target range.

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After the December MPC meeting, RBI Governor Sanjay Malhotra has described India's current macroeconomic environment as a“rare goldilocks period”, defined by the dual benefits of high economic growth and exceptionally low inflation.

This optimistic outlook is supported by a broad-based softening of prices across goods and services, with nearly 80% of the CPI basket recording inflation below the 4% threshold.

Monetary easing

The RBI Governor's remarks came as the Reserve Bank announced its latest monetary policy decision, cutting the repo rate by 25 basis points to 5.25%, following the three-day review meeting that concluded on 5 December, 2025.

Malhotra had asserted that inflation is likely to remain softer in the coming months than earlier projected, supported by higher kharif output, healthy rabi sowing, and favourable commodity trends, ANI reported.

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