India’s retail inflation edged higher in December 2025, signalling that the sharp disinflation phase seen in recent months may be coming to an end. Headline Consumer Price Index (CPI) inflation rose to 1.33% year-on-year, up from 0.71% in November, largely due to fading favourable base effects and a moderation in food price deflation.
Food and beverages inflation remained in negative territory but showed signs of easing. The segment recorded a deflation of 1.9% in December, compared with 2.9% in the previous month and a much higher 7.7% inflation rate a year earlier. Vegetable prices continued to decline sharply, falling 18.5% year-on-year, driven by seasonal supply. Onion prices dropped by nearly 48%, while potato prices fell by around 35%, highlighting the extent of price correction after last year’s spike.
Inflation in edible oils slowed further to 6.8%, extending a four-month moderation trend. Cereals slipped into mild deflation at 0.4%, reflecting improved supply conditions. Analysts point to healthy reservoir levels and favourable agricultural output as factors likely to keep food inflation under control in the coming months.
Fuel inflation remained subdued at 2.0% year-on-year, easing slightly from November. Stable domestic fuel prices and a benign global crude oil environment, with Brent trading near $63 per barrel, helped contain pressures.
Core inflation, which excludes food and fuel, edged up to 4.5%, driven largely by a surge in precious metal prices. Gold prices rose nearly 69% year-on-year, while silver prices jumped over 97%, amid global economic uncertainty. Excluding precious metals, core inflation eased to a modest 2.3%, indicating muted underlying demand.
Economists say that while inflation remains well below the Reserve Bank of India’s target, the December reading suggests that disinflation is bottoming out. With the central bank having cut interest rates by 25 basis points to 5.25%, the current inflation environment continues to provide room for a growth-supportive policy stance.
