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India’s retail inflation is inched up to 1.3% in December, from 0.7% in November, marking a three-month high as food deflation cooled and base effects faded.
The numbers: food inflation is still negative at -2.7%, but that’s an improvement from -3.9% last month. Since food carries nearly 40% weight in the CPI basket, even small moves here matter.
Month-on-month data now shows prices slowly picking up, hinting that the long deflation phase since June 2025 may be ending.
Why it matters: inflation has stayed below the RBI’s 2–6% comfort band for most of the past six months. But with Q3 FY26 average inflation at 0.8%, slightly above the RBI’s estimate, the trend is shifting.
Big theme: low inflation gave the RBI room to cut rates by 125 basis points since last February. If prices keep edging up, that easy stance may not last.
Now, with the Union Budget on February 1 and the RBI policy meeting on February 4–6, inflation is back on the radar. It’s still low but the days of ultra-cool prices may be numbered.
