NEW DELHI: India’s retail inflation rose to 1.3% in December from 0.7% in November, data released by the statistics ministry on Monday showed, as food deflation moderated and favourable base effects began to fade.
The December reading was the highest in three months, signalling a gradual exit from a period of unusually low inflation. Inflation has remained below the lower tolerance band of the Reserve Bank of India’s (RBI) 2-6% target range for five of the past six months, but is now expected to move closer to the central bank’s 4% target as base effects turn unfavourable.
The December print was below the consensus estimate of 1.6% in a Mint poll of economists, who had flagged a bottoming out of food prices and early signs of firming up inflationary pressures.
Food inflation, which carries nearly a 40% weight in the consumer price index (CPI), stayed in deflationary territory at -2.7%, but the pace of decline narrowed further from -3.9% in November. Economists said month-on-month data pointed to a sequential pick-up in food prices, signalling that the deflationary trend that began in June 2025 is nearing its end.
Food prices have been in deflation since June 2025, driven largely by favourable supply conditions and a high base.
The December inflation reading places average CPI inflation for the third quarter of FY26 at 0.8%, marginally above the RBI’s projection of 0.6% for the quarter.
While inflation remains comfortably below the medium-term target of 4%, the upward drift could prompt a more cautious stance from the central bank. Since February last year, the RBI has cut policy rates by a cumulative 125 basis points, aided by low inflation and easing price pressures across food and fuel.
The central bank’s monetary policy committee is next scheduled to meet on 4-6 February, following the Union Budget on 1 February, placing fiscal signals alongside inflation and growth trends at the centre of its decision.