For December, headline CPI inflation rose to 1.3% year-on-year, up 62 basis points from 0.71% in November. However, food inflation fell to 2.7% this month, marking an improvement from last November’s food inflation, which was down by 3.9%.
This indicates an increase of 120 basis points in food inflation in December 2025 in comparison to November 2025. Food inflation in rural areas contracted by 3.08%, while in urban areas it was down by 2.09%.
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The rise in headline inflation and food inflation in December has been attributed to an increase in inflation in personal care and effects, vegetables, meat and fish, eggs, spices, and pulses and products, the government release noted.
Speaking on the recently released CPI data and future expectations, Garima Kapoor, Deputy Head of Research & Economist at Elara Capital, said, “India’s CPI inflation came in line with our estimate of 1.38% as the softness in food prices persisted. We expect FY26 CPI inflation to undershoot RBI’s estimate by 10 to 15 bps and thus expect a 25 bps rate cut in February 2026.”
The December inflation break-up: What’s up, what’s not
The report added that for the month, urban inflation stood at 2.03%, up from November’s 1.4%. It also noted that food inflation in urban areas went up from its November levels. In urban areas, food inflation saw a month-on-month improvement, standing at -2.09% in December compared with -3.6% in November.
Coming to rural inflation, headline inflation was recorded at 0.76% in December, rising from 0.10% in November. Rural food inflation also increased, standing at -3.08% in December compared with -4.05% in November.
In the housing inflation segment, slight movement was seen, as it stood at 2.86% in December 2025 compared with November’s level of 2.95%.
However, education inflation for December 2025 edged down slightly to 3.32% compared with 3.38% in November. Please note that education inflation is combined for both rural and urban sectors.
Transport and communication inflation rates also fell to 0.77% in December 2025 compared with November’s rate of 0.88%.
Lastly, fuel and light inflation also declined to 1.97%, compared with the inflation rate for November 2025, when it was reported at 2.32%.
Retail inflation remained below the Reserve Bank of India’s lower tolerance limit for the fourth consecutive month in December.
The government has mandated the central bank to ensure inflation remains at 4 per cent, with a margin of 2 per cent on either side.