India's retail inflation edged up to a three-month high of 1.33% in December 2025, according to official data released on Monday, January 12, 2026. This increase was primarily driven by rising prices in personal care, vegetables, meat and fish, eggs, spices, and pulses. Despite the uptick, inflation remained below the Reserve Bank of India's (RBI) medium-term target of 4% for the eleventh consecutive month.

The Consumer Price Index (CPI) based headline inflation was 0.71% in November 2025 and 5.22% in December 2024. The previous high was 1.44% in September.

Food prices, which account for nearly half of the CPI basket, saw a reduced decline, falling 2.71% year-on-year in December, compared to a 3.91% drop in November. Vegetable prices declined 18.47%, easing from a sharper 22.20% fall the previous month, indicating a moderation in food segment deflation.

The National Statistics Office (NSO) attributed the rise in headline and food inflation to increased costs in specific categories. Headline inflation was higher in urban areas at 2.03% compared to rural areas at 0.76%.

Fuel and light inflation eased to 1.97% in December from 2.32% in November 2025. Housing inflation also saw a slight decrease to 2.86% in December from 2.95% in November.

The RBI has been mandated by the government to maintain inflation at 4%, with a margin of 2% on either side. The retail inflation remained below the RBI's lower tolerance limit for the fourth consecutive month in December. The central bank had earlier lowered its inflation forecast for 2025-26 to 2%.

According to the NSO data, the top five states with high inflation during December were Kerala (9.49%), Karnataka (2.99%), Andhra Pradesh (2.71%), Tamil Nadu (2.67%), and Jammu and Kashmir (2.26%). Conversely, retail inflation was negative in Assam, Bihar, Haryana, Madhya Pradesh, Odisha, and Uttar Pradesh.

Aditi Nayar, Chief Economist at Icra, noted that the retail inflation rose to 1.3% in December 2025 from 0.7% in November, slightly below Icra's estimate of 1.4%. The increase was driven by narrower deflation in the food and beverages segment, as well as hardening inflation in miscellaneous items.

Paras Jasrai, Associate Director at India Ratings and Research, mentioned that core inflation jumped to a 28-month high of 4.6% in December 2025, with personal care items' inflation reaching a new high of 28.1%, mainly due to rising gold and silver prices. Overall, retail inflation dipped to a record low of 0.8% in the third quarter of FY26.