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Informist, Friday, Jan. 9, 2026

 

By Shubham Rana

 

NEW DELHI - CPI inflation in India is likely to have risen to a four-month high of 1.7% in December because of the statistical effect of an unfavourable base and higher prices of food items and gold, according to an Informist poll of 12 economists.

 

This would mark the first time in three months that retail inflation has exceeded 1%. Inflation, however, is expected to remain below the Reserve Bank of India's medium-term target of 4% for the 11th month in a row. This would also be the fourth consecutive month when inflation has been below the lower end of the RBI's target range of 2-6%.

Inflation was 0.71% in November and 5.22% in December last year. Economists' estimates for December CPI inflation range from 1.0% to 2.3%. The statistics ministry will release CPI data for December at 1600 IST, Monday.

 

This will be the last CPI print under the current series, which has 2012 as the base year. The statistics ministry will release a new CPI series with 2024 as the base year on Feb. 12.

 

Inflation has declined in 2025-26 (Apr-Mar) because of favourable base effects and lower food prices, which allowed the RBI's Monetary Policy Committee to lower interest rates by a cumulative 125 basis points in 2025.

 

If inflation rises to 1.7% in December, it would take the average for the December quarter to 0.9%, 30 basis points higher than the RBI's forecast. With favourable base effects turning adverse, CPI inflation is seen rising ahead. The RBI projects inflation to rose to 2.9% in the March quarter and further up to 3.9-4.0% in the first half of FY27. The central bank expects CPI inflation to average 2.0% in FY26.

 

"CPI inflation will likely average 20-30bp (basis points) above the RBI's 0.6% forecast for Q4 2025. If this trend continues, the RBI might turn a little cautious on its inflation outlook," ANZ Bank said in a report. "We expect inflation to remain above 4% in H2 FY27 (of fiscal year ending March 2027), partly as base effects turn unfavourable."

 

The base effect in December is such that if the general index remains unchanged from November, CPI inflation would rise to 1.3%. The general index had declined 0.6% on month in December 2024.

 

An inflation rate of 1.7% in December would translate to a 0.4% rise in the overall index from November, which would be much the highest month-on-month rise since August. Historically, the general index has declined 0.4% on month in December over the last 12 years.

 

The sequential rise in December inflation is likely because of higher food prices, particularly vegetables. According to data from the Department of Consumer Affairs, retail prices of tomato and onion rose 13% and 4%, respectively, from November. Potato prices, however, fell 4.0% from November. Prices of eggs also rose 5% on month in December.

 

Economists at Nirmal Bang Institutional Equities expect food and beverage inflation to rise to (-)1.3% in December from (-)2.8% in November. "This is generally unusual for a winter month when the food price levels normally recede," Union Bank of India said in a report. "Highest price gain was seen in tomatoes as early onset of winter led to a spike in demand and October rains impacted the supply."

 

Core inflation--which excludes volatile food and fuel items--is seen rising slightly to around 4.5% in December from 4.4% in November because of higher gold prices. "Seasonal demand during the holiday season is likely to add further inflationary pressure on the services front," BofA Securities said in a report. "However, core goods prices to broadly remain in check due to the year-end sales."

 

The following is a summary of the poll on CPI inflation in December:

 

ORGANISATION	CPI INFLATION ESTIMATE
India Ratings and Research	1.0%
QuantEco Research	1.33%
ICRA	1.4%
Nirmal Bang Equities Pvt. Ltd.	1.5%
HDFC Bank	1.56%
ICICI Bank	1.64%
Union Bank of India	1.66%
Sunidhi Securities	1.71%
YES Bank	1.8%
ANZ Bank	1.8%
BofA Securities	2.0%
Kotak Mahindra Bank	2.3%

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Tanima Banerjee

 

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