Short Description
Retail inflation has surged to a three-month high of 1.3% in December, influenced by food price dynamics and shifting trends in personal care, highlighting economic concerns for 2026.
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3 minutes and 30 seconds
Main Article
Recently released data from the National Statistics Office (NSO) reveals that retail inflation in India has climbed to a three-month high of 1.3% in December. This marks an increase from November’s 0.7%, but it remains significantly below the Reserve Bank of India’s (RBI) tolerated level for the fourth consecutive month. The rise in the Consumer Price Index (CPI) is attributed primarily to narrowing deflation in certain food categories and a waning favorable base effect. Interestingly, while food inflation contracted by 2.7% this month, which is 120 basis points higher than November, rural inflation figures stood at 0.8% compared to urban inflation, which was recorded at 2%.
Additionally, core inflation has spiked to a 28-month high of 4.8%, an increase from last month’s 4.4%. This jump in core inflation was driven largely by soaring gold and silver prices, which have experienced a dramatic rise of 69% and 97% year-on-year, respectively. Notably, when excluding these metals, core inflation moderated to a more controlled 2.3%. The overall inflation increase in December underscores a significant shift, especially in categories such as personal care and effects, vegetables, and essential foods like meat and fish, hinting at broader economic challenges.
Looking ahead, experts, including Rajani Sinha, Chief Economist at CareEdge, anticipate that while headline inflation may creep higher, it will likely stay beneath the RBI’s 4% target through the remainder of fiscal year 2026 (FY26). Current projections suggest CPI inflation to average around 2.1% in FY26 and increase to 4% in FY27, based on the existing CPI basket. An important upcoming development is the rollout of a new CPI series with a 2024 base year, which is expected to provide clearer insights into the inflation landscape.
From a monetary policy perspective, the recent uptick in inflation is not expected to alarm the RBI. There remains room for a potential 25 basis points rate cut; however, experts believe the Monetary Policy Committee (MPC) will likely pause to retain policy flexibility. Any further easing will be contingent upon the evolving growth conditions in India’s economy.
Short Summary
In December, retail inflation in India rose to 1.3%, influenced by food price fluctuations and rising costs in personal care items. Experts expect inflation to remain below RBI targets in 2026, with key developments in ongoing monetary policy considerations.
