India: Inflation rises in December from November
Latest reading: Consumer prices were up 1.3% in annual terms in December, following a 0.7% increase in the prior month. Still, the print was below market expectations and remained comfortably below the Reserve Bank of India’s 4.0% target as recently strong monsoons have led to bumper harvests, which have dampened food prices.
Relative to the previous month’s figures, price pressures were higher for food and beverages in December (-1.8% on a year-on-year basis vs -2.8% in November). In contrast, there were reduced price pressures for fuel and light (+2.0% vs +2.3% in November) and clothing and footwear (+1.4% vs +1.5% in November).
Lastly, consumer prices rose 0.05% in December in month-on-month terms, following a 0.30% increase in the prior month.
Outlook: Inflation will trend up throughout calendar year 2026, rising above the Reserve Bank of India’s 4.0% target in the October–December quarter. Harvests should normalize and oil prices should stabilize; moreover, India’s statistical office will update the methodology it uses to calculate changes in consumer prices from February onward, slightly pushing up inflation in turn. Looking ahead, key risks include weather shocks, due to their impact on agriculture, plus shifts in commodity prices and the exchange rate.
Panelist insight: Nomura’s Aurodeep Nandi and Sonal Varma underline that there is likely to be some uncertainty with near-term inflation prints:
“A new CPI series will be released from 12 February onwards, with a new base year (from 2012 to 2024), new weights (higher core categories over staple foods) and methodological upgrades. Our calculations suggest potential for a ~0.3-0.4pp rise in headline CPI, though this is likely to be largely technical.”
Goldman Sachs’ Santanu Sengupta and Arjun Varma’s calculations suggest a slightly higher number:
“Hypothetically, if we were to assume the expenditure weights from the HCES in our current CPI basket, headline inflation under the new weights would likely be around 60bp higher in 1H CY26 (vs. our current forecasts), given benign food prices, but would likely converge towards our current forecasts in 2H CY26 as lower core inflation—driven by softer gold and silver prices—offsets higher food inflation.”