Rising Retail Inflation: A Mixed Economic Forecast for India

Retail inflation in India climbed to 1.33% in December due to increased food and personal care prices. Despite this rise, inflation stayed below the Reserve Bank of India's target. Economic experts noted the narrowing food deflation and predicted further rises in CPI inflation as base effects diminish.

India's retail inflation rose to 1.33% in December, marking a three-month high driven by increased costs in food and personal care. Nevertheless, it remained under the Reserve Bank of India's lower tolerance level. The Consumer Price Index (CPI) showed a rise from 0.71% in November to 1.33% in December 2025.

Food prices, negative for seven months, contributed to this inflation. The National Statistics Office highlighted increases in sectors such as personal care, vegetables, meat, and spices. Urban areas faced higher inflation at 2.03%, compared to rural areas at 0.76%, and states like Kerala saw significant inflation spikes.

Experts predict further CPI inflation increases as base effects reduce. Aditi Nayar from Icra anticipates policy pauses due to evolving economic data, while Crisil's Dipti Deshpande expects a rise to 5% by fiscal 2027, driven by reduced food deflation effects.

(With inputs from agencies.)