Retail inflation rose to a three-month high of 1.33 per cent in December, mainly due to higher prices of food items, but remained below the Reserve Bank of India's lower tolerance level.
The Consumer Price Index (CPI) based headline inflation was 0.71 per cent in November and 5.22 per cent in December 2024.
The inflation stood at 1.44 per cent in September.
The food inflation in December was (-) 2.71 per cent compared to (-) 3.91 per cent in November and remained negative for the seventh consecutive month.
"The increase in headline inflation and food inflation during the month of December 2025 is mainly attributed to an increase in inflation of personal care and effects, vegetables, meat and fish, egg, spices and pulses and products," the National Statistics Office (NSO) said while releasing the CPI data.
The headline inflation in urban areas was higher at 2.03 per cent compared to 0.76 per cent in rural India.
The retail inflation remained below the Reserve Bank of India's lower tolerance limit for the fourth consecutive month in December.
The government has mandated the central bank to ensure inflation remains at 4 per cent, with a margin of 2 per cent on either side.
According to the NSO data, the top five major states with high inflation during December were Kerala (9.49 per cent), Karnataka (2.99 per cent), Andhra Pradesh (2.71 per cent), Tamil Nadu (2.67 per cent), and Jammu and Kashmir (2.26 per cent).
On the other hand, retail inflation was negative in Assam, Bihar, Haryana, Madhya Pradesh, Odisha, and Uttar Pradesh.
The December inflation data is the last of the current series (2012).
The January inflation will be calculated under a new CPI series with the base year (2024 = 100).
The new series is expected to be a comprehensive revision of coverage, item basket, weights and methodology used in index compilation.
The new series will be released in February.
The exercise, being done after more than a decade, is aimed at substantially improving the representativeness, reliability, accuracy, and overall quality of the inflation data.
Aditi Nayar, chief economist at Icra, said the retail inflation expectedly rose to 1.3 per cent in December 2025 from 0.7 per cent in November, while printing marginally lower than Icra's estimate of 1.4 per cent for the month.
The uptick was driven by narrower deflation in the food and beverages segment, as well as hardening inflation in the miscellaneous items, she said.
"While the December 2025 MPC minutes suggest a possibility of another rate cut in February 2026, Icra believes that a pause is warranted at the current juncture.
“Besides, it would be prudent to wait and assess the updated CPI (base: 2024) and GDP (base: 2022-23) series, which are due to be released later in February, as these will determine the current growth-inflation mix and aid in forming a fresh outlook," Nayar said.
Dipti Deshpande, Principal Economist at Crisil, said the uptick was driven by food, where deflation narrowed as the high base effect gradually waned.
"Going ahead, CPI inflation is likely to inch up as the base effect for food fades further.
“We expect CPI inflation to rise to 5 per cent in fiscal 2027, from an estimated 2.5 per cent in the current fiscal as food inflation normalises," Deshpande said.
Paras Jasrai, associate director at India Ratings and Research, said the core inflation jumped to a 28-month high of 4.6 per cent in December 2025, as personal care items' inflation hit a fresh high of 28.1 per cent, mainly due to the increase in gold and silver prices.
Overall, the retail inflation dipped to a record low of 0.8 per cent in 3Q FY26, thereby being the second successive quarter of inflation levels being out of the lower tolerance band (4 per cent, +/- 2 per cent) of the Reserve Bank's Monetary Policy Committee (MPC), Jasrai added.
NSO collects price data from selected 1,114 urban markets and 1,181 villages covering all states/UTs.