Breaking News:India’s retail inflation quickens for second straight month to 1.33% in December– What Just Happened

India’s retail inflation quickened to 1.33% in December 2025 on an annual basis, as against 0.71% in November 2025, driven by higher prices in personal care, vegetables, meat and fish, eggs, spices, and pulses and products. This marked the 11th straight month that inflation remained below the Reserve Bank of India’s medium-term target of 4%.

Food prices, which account for nearly half of the CPI basket, fell 2.71% year-on-year in December, narrowing from a 3.91% decline in November. Vegetable prices declined 18.47%, compared with a sharper 22.20% fall a month earlier, reflecting easing deflation in the food segment.

Fuel and light inflation eased to 1.97% in December from 2.32% in November 2025.

Housing inflation stood at 2.86% year-on-year in December, marginally lower than 2.95% in November. The housing index is compiled for the urban sector only.

RBI inflation forecast

Earlier, the Reserve Bank of India’s Monetary Policy Committee (MPC) said the central bank now expects inflation to average 2.0% in the current fiscal year, sharply lower than its earlier projection of 2.6%.
The central bank has steadily pared back its inflation forecast over the course of the fiscal year while raising its growth projections in successive MPC meetings. The FY26 inflation outlook, first estimated at 4.2% in February, was cut to 2.6% in October.The MPC also released updated quarterly inflation projections, forecasting 0.6% in Q3, 2.9% in Q4, 3.9% in Q1, and 4.0% in Q2 of FY27. By comparison, the October policy round had projected inflation at 1.8% in Q3, 4.0% in Q4, and 4.5% in Q1 of FY27.

This follows the MPC’s decision to cut the policy repo rate by 25 basis points to 5.25% while maintaining a neutral stance, signalling a calibrated approach to supporting growth without compromising inflation control, as it described the Indian economy as being in a “rare Goldilocks period” of high growth and low inflation.

Against this backdrop, India has projected economic growth of 7.4% in fiscal 2025–26, signalling resilience in Asia’s third-largest economy even as global growth slows and financial conditions remain tight amid renewed tariff pressures under US President Donald Trump.

The projection is above the RBI’s latest estimate of 7.3% and marks an improvement over last year’s 6.5% expansion. Nominal GDP, which factors in inflation, is expected to grow by 8% in the current fiscal, slower than the 9.7% growth recorded last year. These estimates will form the base for the Union Budget, scheduled to be presented on February 1.

India’s economic momentum strengthened in the second quarter of FY26, with GDP growth accelerating to a six-quarter high of 8.2%, beating market expectations and improving on the 7.8% expansion in the April–June quarter.

The economy had expanded by 6.5% and 9.2%, respectively, in the previous two fiscal years.