Retail inflation rises to 1.33% in December as kitchen essentials get pricier: Govt data

New Delhi: India’s annual retail inflation rose to a three-month high of 1.33% in December after hitting a record low of 0.25% in October, as prices of gold, silver and some food items jumped, official data showed on Monday.

Despite the uptick, the headline inflation remained below the Reserve Bank of India’s lower tolerance threshold of 2% for the fourth straight month. The Consumer Price Index (CPI) based inflation stood at 0.71% in November. In September it was recorded at 1.44%.

Prices of some food items firmed up. However, food inflation, which accounts for nearly half of the CPI basket, remained in the negative zone for the seventh month in a row.

Food deflation narrowed to 2.71% in December from 3.91% in the previous month and 5.02% recorded in October. This means, in December general food prices were lower when compared with the same month last year.

There was a jump in the prices of meat, fish and eggs, while the pace of decline in vegetables prices narrowed. Vegetables deflation narrowed to 18.47% in December from 22.20% in the previous month.

Cereals inflation entered the negative territory for the first time since September 2021, driven by decline in prices of wheat and rice. December recorded 0.35% deflation in cereals.

Urban inflation increased from 1.4% in November to 2.03% December, while rural inflation firmed up from 0.10% to 0.76% during this period.

There was a wide regional variation in the price rise. Kerala witnessed 9.49% inflation in December against the national average of 1.33%. Karnataka posted inflation of 2.99% during the month under review, the second highest. Andhra Pradesh (2.71%); Tamil Nadu (2.67%) and Jammu & Kashmir (2.26%) also registered higher inflation than the national average. On the other hand, states like Uttar Pradesh, Bihar, Odisha, Madhya Pradesh and Assam recorded deflation.

Core inflation (which excludes food and fuel) rose to 4.6% in December from 4.3% in the previous month, driven by the jump in gold prices. Inflation in gold, silver and ornaments climbed to a high of 70.4% in December—gold inflation was up 68.7% while silver at 97.1%. Excluding gold, core inflation was marginally higher at 2.55% from 2.5% in November.

“Despite upward pressure from precious metals, the positive impact of GST rationalisation and continued deflation in the food and beverages category helped keep overall inflation contained,” said Rajani Sinha, Chief Economist, CareEdge Ratings.

Inflation to firm up further

According to analysts, inflation is likely to rise in the coming months as the impact of high base effect would wane further.

“We expect CPI inflation to rise to 5% in fiscal 2027, from an estimated 2.5% in the current fiscal as food inflation normalizes,” said Dipti Deshpande, Principal Economist, Crisil.

“Weak global crude prices should keep fuel inflation contained, while the lingering impact of GST rate cuts should help keep the lid on core inflation until the first half of next fiscal,” Deshpande said.

According to CareEdge Ratings, the retail inflation is expected to edge higher but remain below the RBI’s 4% target for the rest of 2025-26.

“With the favourable base effect fading away, the retail inflation is expected to pick-up from 4Q FY26 onwards,” said Paras Jasrai, Associate Director, India Ratings and Research, adding the inflation expected to average 2.6% in January-March quarter against a record low of 0.8% registered in Q3 of the current financial year.