Whalesbook
India CPI Climbs to 1.33% in December 2025
India's headline retail inflation rate accelerated to 1.33% in December 2025, a significant jump from 0.71% in November. This final print of the existing Consumer Price Index (CPI) series was influenced by an unfavorable base effect, even as food prices continued their year-on-year decline for the seventh consecutive month.
Food Prices Decline Amidst Shifting Data
Retail food prices saw a year-on-year decrease of 2.71% in December, following a 3.91% drop the previous month. However, this decline was not enough to offset other upward pressures. The Consumer Food Price Index also fell by 0.2% month-on-month, driven by lower prices for vegetables, fruits, and cereals, reflecting a favorable kharif sowing season.
Impact of Precious Metals
A significant driver behind the headline inflation figure was the surge in gold and silver prices. Both commodities recorded record highs, with gold inflation at 68.66% and silver at 97.07% year-on-year in December. If these precious metals were excluded from the CPI calculation, the inflation rate would have stood at a much lower 0.26%. Core inflation, excluding food and fuel, edged up to 4.6% from 4.4%.
Policy Implications and Data Overhaul
The 1.33% inflation print is slightly above the Reserve Bank of India's (RBI) forecast of 0.6% for the quarter. The RBI, mandated to keep inflation within a 2-6% band around its 4% target, had previously cut its policy repo rate by 125 basis points in 2025 to 5.25% due to persistently low price increases. The central bank anticipates inflation to rise towards 4% in the first half of 2026-27. Analysts, like those at Barclays, expect a pause in rate cuts at the upcoming February 6 Monetary Policy Committee (MPC) meeting due to this upside surprise in inflation.
New CPI Series on the Horizon
This December report marks the conclusion of the current CPI series, which uses a 2012 base year and an older consumption basket. The Ministry of Statistics and Programme Implementation will soon launch a new series with a 2024 base year and an updated basket derived from recent household expenditure surveys. Inflation data for January under this new series is scheduled for release on February 12, shortly after the Union Budget.