India’s consumer price inflation, measured by the Consumer Price Index, rose to 1.3% in December 2025 from 0.7% in November, in line with estimates, reflecting a gradual normalisation in food prices.
According to a report by Nuvama Institutional Equities, food inflation stood at minus 1.8% in December compared with minus 2.8% in November. The moderation was driven by a slower pace of decline in vegetable prices. Vegetable prices were 18% lower year-on-year in December, compared with a 22% decline in November. Prices of other food items excluding vegetables remained largely stable, indicating that overall food inflation has not accelerated significantly.
Core inflation, which excludes food and fuel, remained subdued in December. Headline core inflation was recorded at 4.6%, influenced by elevated gold and silver prices. However, after excluding gold, silver, petrol and diesel, core inflation eased to 2.4%, the lowest level on record.
Prices of essential categories such as clothing, housing, healthcare, recreation and transport increased gradually, pointing to continued weakness in consumer demand and a lack of broad-based momentum in overall spending.
Analysts expect vegetable prices to normalise gradually in the coming months, which could lead to a mild increase in headline inflation as favourable base effects fade. Despite this, overall inflation is expected to remain within the Reserve Bank of India’s prescribed tolerance band. Potential cuts in the goods and services tax and subdued consumer demand are expected to limit upward pressure on core inflation.
The report also noted that household income growth and corporate profitability remain weak, while global uncertainty and international market conditions could affect India’s exports. In an environment of contained inflation and a slowing economy, the Reserve Bank of India has room to consider easing monetary policy.
Experts said the central bank could cut interest rates by 0.25% to 0.50% in 2026 to improve liquidity conditions and support investment and consumption.
