India’s headline retail inflation rate based on the Consumer Price Index (CPI) rose to 1.33 per cent in the final month of 2025 from 0.71 per cent in November, pulled up by an unfavourable base effect even as food prices were down on a year-on-year basis for the seventh month in a row.
According to data released on Monday by the Ministry of Statistics and Programme Implementation (MoSP), retail food prices fell 2.71 per cent year-on-year in December after falling by 3.91 per cent the previous month.
The December 2025 retail inflation figure is the last in the existing series, with the statistics ministry set to begin publishing data as per a new and updated CPI from next month. The upcoming series will have a new base year – 2024 compared to 2012 at present – and will be based on an expanded and updated basket of items finalised from the 2023-24 Household Consumption Expenditure Survey as against 2011-12 currently.
Policy impact
At 1.33 per cent, the latest headline inflation print is broadly along expected lines and takes the average for the last quarter of 2025 to 0.8 per cent, slightly higher than the Reserve Bank of India’s (RBI) forecast of 0.6 per cent.
The Indian central bank, which has a legal mandate to target 4 per cent inflation in the medium term in a band of 2-6 per cent, cut the policy repo rate by 125 basis points (bps) in 2025 to 5.25 per cent in response to record-low price increases. In fact, the December CPI inflation figure is the 11th month in a row that it has come in lower than RBI’s target.
The RBI expects inflation to rise further in the coming months and average around 4 per cent in the first half of 2026-26. However, this forecast does not take into account the changes that will be incorporated in the new CPI inflation series.
The central bank’s Monetary Policy Committee (MPC) is scheduled to next meet from February 4-6, days after the Union Budget for 2026-27 will likely be presented in Parliament. Inflation data for January as per the new CPI series will be released on February 12.
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