India's retail inflation likely rose to 1.66% in Dec 2025 from 0.71% in Nov, driven by food prices, says a Union Bank of India report. Core inflation also rose. The RBI had earlier revised its FY26 inflation forecast down to 2.0%.
Retail inflation in India has likely edged up in December 2025 to 1.66 per cent from 0.71 per cent in November, with food prices strengthening across most segments of the food inflation basket, according to projections made by Union Bank of India.
The retail inflation data for December 2025 CPI will be released on January 12, 2026 or the next working day if January 12 happens to be a holiday. The retail inflation or Consumer Price Index (CPI) likely recorded a spike from November but remained much below 5.2 per cent registered in December 2024, even as the base effect also goes on losing steam, as per the Bank's projections.
Core and Food Inflation Breakdown
Core inflation, however, likely rose to 4.68 per cent as gold prices resumed their rally through December. Core inflation measures typically exclude food and fuel. Food inflation probably continued to be negative in December, even as month-on-month food prices were up across most of the food segments.
"We expect food CPI to print -1.19% as against -2.78% last month and a high base of 7.7% last Dec. Sequentially, food inflation has gone up as food prices across the board (barring a few segments like milk) gained further momentum during the month as indicated by the on-the-ground (OTG) prices collected from the Department of Consumer Affairs," the Union Bank of India report read.
According to the report, the highest price gain was seen in tomatoes as early onset of winter led to a spike in demand and October rains impacted the supply. "Food inflation is expected to remain largely negative in Q3FY26; however, there remains an upside risk from unseasonal winter rains and consequent supply chain disruptions," the Bank's report read.
RBI's Optimistic Outlook and Policy Action
With inflation under control, the RBI in December revised its CPI inflation forecast for 2025-26 to 2.0 per cent, down from its previous estimate of 2.6 per cent. Quarterly projections show inflation at 0.6 per cent in Q3 and 2.9 per cent in Q4, before rising to 3.9 per cent in Q1 2026-27 and 4.0 per cent in Q2, still within the central bank's 2-6 per cent target range.
RBI Governor Sanjay Malhotra, after the December MPC meeting, characterised India's current macroeconomic environment as a "rare goldilocks period", characterised by high economic growth and exceptionally low inflation. The remarks came as the Reserve Bank announced its latest monetary policy decision, cutting the repo rate by 25 basis points to 5.25 per cent, after the three-day review meeting that concluded on December 5.
Nearly 80 per cent of the CPI basket recorded inflation below 4 per cent, indicating a broad-based softening across goods and services. The RBI Governor had asserted that inflation is likely to remain softer than earlier projected, supported by higher kharif output, healthy rabi sowing, and favourable commodity trends. (ANI)
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