India's headline inflation, measured by the Consumer Price Index (CPI), witnessed a notable uptick in December 2025, reaching a three-month peak. The data released shows a clear shift from the previous months, providing crucial insights for policymakers and the economy.
Key Inflation Figures and Trends
The CPI inflation for December 2025 settled at 1.33% on a year-on-year basis. This marks a significant increase of 62 basis points from the November 2025 figure. The current reading is the highest observed in the past three months, indicating a reversal in the recent disinflationary trend.
Despite the rise, inflation remains comfortably within the Reserve Bank of India's (RBI) tolerance band. The central bank has an inflation target of 4%, with a flexible margin of 2% on either side. This benign territory provides the RBI with the necessary room to continue its supportive stance towards economic growth without immediate pressure to tighten monetary policy.
Food Inflation and Rural-Urban Divide
A critical component of the inflation basket, food prices, continued to contract but at a slower pace. The All India Consumer Food Price Index (CFPI) recorded a deflation of -2.71% in December 2025 compared to the same month last year. However, this was a 120 basis points increase from the -3.91% seen in November 2025.
The data reveals a distinct rural-urban split. In rural India, food inflation was recorded at -3.08%, while urban centres saw a figure of -2.09%. Both figures showed a marked moderation from the deeper deflation witnessed in November 2025, where rural food inflation was -4.05% and urban was -3.60%.
The uptick in both headline and food inflation during December was primarily driven by heightened price pressures in specific categories. Key contributors included vegetables, meat and fish, eggs, spices, and pulses and related products, alongside items under personal care and effects.
Sectoral and Regional Analysis
Breaking down the overall inflation figures regionally provides a clearer picture. Headline inflation in rural areas rose sharply to 0.76% in December from a mere 0.10% in November. Urban headline inflation also firmed up, increasing to 2.03% from 1.40% in the previous month.
Looking at other crucial sectors, housing inflation, which is calculated only for the urban sector, eased slightly. It came in at 2.86% year-on-year in December, down from 2.95% in November. Education inflation, covering both rural and urban areas, was recorded at 3.32%, marginally lower than the 3.38% seen a month earlier.
The trends over the past 13 months for both CPI (General) and CFPI clearly highlight this recent upward movement, suggesting a possible bottoming out of the deflationary phase in food prices and a gradual build-up of core inflationary pressures.
