India’s consumer price inflation (CPI) for December 2025 came in at 1.33% year-on-year, remaining subdued and below market expectations and the Reserve Bank of India’s inflation target for the eleventh consecutive month. This low headline figure was largely driven by continued deflation in food prices.
Food Price Deflation Reduces Overall Inflation
The key factor behind the weak inflation reading was the continued fall in food prices, which remain in negative territory at around –2.71%. Within the food category, vegetables saw sharp declines, with prices down about 18.5% year-on-year, and pulses also remaining significantly cheaper compared with a year earlier. Although the pace of food deflation has moderated compared with November, it continued to exert downward pressure on the overall CPI print.
Underlying Price Pressures Showing Signs of Firming
Despite the low headline rate, some non-food components of inflation indicate rising price pressures. On a month-on-month basis, inflation marked an increase of 0.71%, suggesting that prices are gradually firming up. Additionally, urban inflation climbed to around 2% and rural inflation also edged up, pointing to stronger cost pressures beyond the food segment.
Broader Inflation Trends
Prices in other categories showed mixed trends. While fuel and light inflation moderated and categories like housing and clothing recorded small declines in price growth, other items — including personal care products, meat, eggs, spices, and pulses — saw price increases that contributed to the overall rise in inflation compared with November.
What This Means
Overall, the December inflation data paints a complex picture: falling food prices continue to keep headline inflation low, but rising prices outside the food basket and increased urban cost pressures suggest that broader inflation may be strengthening. Policymakers will likely consider these factors when assessing monetary policy and future interest rate decisions.
Leave a Comment