India's retail inflation rises to 1.33% in December

India’s annual retail inflation climbed to a three-month high of 1.33% in December, driven by higher prices of kitchen essentials and a sharp jump in gold and silver rates, official government data released on Monday showed.The Consumer Price Index (CPI)-based inflation rose from 0.71% in November, after having touched a record low of 0.25% in October. In September, retail inflation stood at 1.44%. Even with the uptick, headline inflation remained below the Reserve Bank of India’s lower tolerance threshold of 2% for the fourth consecutive month.
Food prices showed mixed trends during the month. Food inflation, which carries nearly half the weight in the CPI basket, remained in deflationary territory for the seventh straight month, although the pace of deflation moderated. Food deflation narrowed to 2.71% in December from 3.91% in November and 5.02% in October, indicating that food prices were still lower compared to the same month last year, but the decline was easing.Prices of meat, fish and eggs increased, while the pace of fall in vegetable prices slowed. Vegetable deflation narrowed to 18.47% in December from 22.20% a month earlier. Cereals inflation slipped into negative territory for the first time since September 2021, led by a decline in wheat and rice prices, with cereals registering a deflation of 0.35% in December.
Inflationary trends diverged across regions. Urban inflation rose sharply to 2.03% in December from 1.4% in November, while rural inflation firmed up to 0.76% from 0.10% over the same period. Among states, Kerala recorded the highest inflation at 9.49%, significantly above the national average. Karnataka followed with 2.99%, while Andhra Pradesh (2.71%), Tamil Nadu (2.67%) and Jammu & Kashmir (2.26%) also reported inflation higher than the all-India level. In contrast, states such as Uttar Pradesh, Bihar, Odisha, Madhya Pradesh and Assam witnessed deflation.Core inflation, which excludes food and fuel, increased to 4.6% in December from 4.3% in November, largely due to a surge in precious metal prices. Inflation in gold, silver and ornaments soared to 70.4% during the month, with gold inflation at 68.7% and silver at a steep 97.1%. Excluding gold, core inflation edged up marginally to 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 at CareEdge Ratings.Looking ahead, experts expect inflation to firm up gradually in the coming months as the favourable base effect fades. From an experts’ perspective, food inflation is likely to normalise over time, pushing headline CPI higher, while relatively weak global crude oil prices should help keep fuel inflation in check. Analysts also believe the lingering impact of earlier GST rate cuts could continue to cap core inflation in the near term.According to rating agencies, retail inflation is expected to edge higher but remain below the RBI’s 4% target for most of 2025-26. With the base effect waning, inflationary pressures are projected to build from the fourth quarter of FY26, with average inflation seen rising in the January–March period compared with the record lows recorded earlier in the current financial year.

(Business Correspondent)