A shopkeeper displays Santa Claus ornaments at a market ahead of Christmas celebrations on December 9, 2025 in Srinagar, Jammu and Kashmir. (Photo courtesy of Firdous Nazir/NurPhoto, Getty Images)
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India’s consumer inflation rate rose to 1.33% in December, accelerating from 0.71% in the previous month.
Headline inflation fell short of economists’ expectations for a 1.5% rise in the consumer price index, according to a Reuters poll.
India’s Ministry of Statistics and Program Implementation said in a statement on Monday that the rise in headline inflation and the rise in food prices were mainly due to “increased inflation in personal care and household goods, vegetables, meat and fish, eggs, spices and pulses, and manufactured goods.”
In December, the headline inflation rate increased by 0.76% in rural areas and 2.03% in urban areas. However, fuel and diesel inflation was 1.97%, lower than November’s 2.32%.
Anubhuti Sahai, head of Indian economic research at Standard Chartered Bank, said that while “lower inflation is likely to sustain expectations for a final rate cut”, the central bank will be able to “better assess the trajectory of inflation and interest rates” from April’s policy, given that a new CPI series begins next month.
The Reserve Bank of India expects consumer inflation to be 2% in the fiscal year ending March 2026, revised down from its October forecast of 2.6%. The central bank expected inflation to be 2.9% in the three months to March, rising to 4.0% in the quarter ending September 2026.
Record-low inflation in 2025 will slow nominal GDP growth, raising concerns among policymakers and investors.
Last week, India announced initial forecasts for real GDP growth of 7.4% and nominal GDP growth of 8.0% in 2026. This was significantly lower than the 10.1% nominal GDP growth forecast in the Union Budget for the same year.
“The slowdown in nominal GDP growth is a cause for concern,” said Rana Gupta, managing director of Indian equities at Manulife Investment Management. He added that profit growth in FY2026 will slow to 9-10% from 12-13% previously.
Nominal GDP growth is expected to accelerate to 10-11% in 2027 as inflation rises, Gupta told CNBC’s “Inside India” on Thursday.
From February 12, India will launch a new CPI series with 2024 as the base year.
