India's headline retail inflation rate witnessed an uptick in the final month of 2025, closing the year outside the Reserve Bank of India's mandated target range. The Consumer Price Index (CPI)-based inflation rose to 1.33 per cent in December 2025, according to official data released on Monday, January 12, 2026.
December Data Marks End of an Era
The inflation figure for December 2025 holds particular significance as it represents the last data point under the existing CPI series. The Ministry of Statistics and Programme Implementation (MoSPI) confirmed that from next month, it will begin publishing inflation numbers based on a new and updated series. This upcoming series will feature a new base year of 2024, replacing the current 2012 base, and will incorporate an expanded basket of goods and services derived from the 2023-24 Household Consumption Expenditure Survey.
The December inflation print of 1.33% marks a noticeable increase from the 0.71 per cent recorded in November 2025. Analysts attribute this rise primarily to an unfavourable base effect. Notably, this increase occurred despite food prices continuing their downward trajectory. Retail food inflation remained in negative territory, falling by 2.71 per cent year-on-year in December, following a 3.91 per cent decline in the previous month. This marked the seventh consecutive month of falling food prices on an annual basis.
Policy Implications and RBI's Stance
The latest inflation number, while higher, was broadly in line with market expectations. It pushed the average inflation for the October-December quarter of 2025 to 0.8 per cent, which is slightly above the Reserve Bank of India's earlier projection of 0.6 per cent. More critically, the December figure of 1.33% means inflation has ended the year below the central bank's lower tolerance limit of 2%. In fact, this was the 11th consecutive month that CPI inflation came in below the RBI's medium-term target of 4%.
In response to persistently low inflation through much of 2025, the RBI had embarked on an aggressive monetary easing cycle. The central bank cut the policy repo rate by a cumulative 125 basis points over the year, bringing it down to 5.25 per cent. The RBI's Monetary Policy Committee (MPC) is next scheduled to meet from February 4 to 6, 2026. This meeting will take place shortly after the expected presentation of the Union Budget for the 2026-27 fiscal year in Parliament.
Looking Ahead to a New Series
The central bank has indicated that it expects inflation to rise in the coming months, potentially averaging around 4 per cent in the first half of the 2026-27 financial year. However, it is important to note that this forecast is based on the old CPI series. The impact of the revised consumption basket and new base year in the upcoming series remains a key unknown for future policy decisions.
The first inflation data set under the new CPI series, for the month of January 2026, is slated for release on February 12, 2026. This transition to a new series, reflecting more contemporary consumption patterns, is a significant statistical overhaul that will provide a fresh lens through which to view price pressures in the Indian economy.
