India’s retail inflation stays below RBI’s lower band for fourth month at 1.33% in December

Retail inflation rose to 1.33% in December, up slightly from 0.71% in November, as a benign base effect and lower food prices kept the headline figure in check.

The CPI inflation data for December comes ahead of the Union Budget 2026-27 on February 1 and the Reserve Bank of India’s Monetary policy Committee (MPC) meeting from February 4-6.

While CPI inflation data will be crucial for both of these major political events, it will also be the last data set in the current CPI series. From February, a new CPI series will be launched with a base year of 2024 with a basket of components and an updated methodology that will provide retail inflation estimates for January 2026.

“This is the latest release of the CPI for the base 2012=100. The revised CPI series for the base 2024=100 will be released on February 12, 2026 (Thursday) or the next working day if the 12th is a holiday,” a statement issued by the Ministry of Statistics and Program Implementation said on Monday.

This will be the first adjustment to the CPI in a decade. The existing series with base year 2012 was released in January 2015. The new series represents a major milestone in the process of data modernization in India. Later in the month, on February 27, a new GDP series with base year 2022-23 will also be released for the second advance estimates of FY27 GDP. In May 2026, an updated series for the industrial production index will also be released.

Analysts expect retail inflation to rise in the coming months and are also factoring in another 25 basis point interest rate cut by the MPC in the next few months, but remain neutral on the timing noting that the new series of CPI and GDP will shed more light on the macroeconomic scenario.

“While the December 2025 MPC minutes suggest the possibility of another rate cut in February 2026, ICRA believes a pause is warranted at the current stage. Furthermore, it would be prudent to wait and evaluate the updated CPI (base: 2024) and GDP (base: 2022-23) series, which are due for release later in February, as they will determine the current growth and inflation mix and help form new forecasts.” “. Aditi Nayar, Chief Economist and Head of Research and Outreach, ICRA.

Paras Jasrai, associate director, India Ratings and Research, noted that retail inflation in December 2025 was at its highest level in three months and that the marginal rise was largely due to lower food deflation. Food price deflation fell to 2.7% in December 2025 from 3.9% in the previous month. The agency expects next month’s final policy option for FY26 to be a 25 basis point cut in interest rates which could be the last easing in the current cycle by the Monetary Policy Committee.