New Delhi, Jan 12 (UNI) CRISIL said India’s December inflation data point to the beginning of a gradual rise in price pressures, even as headline inflation remains well below the Reserve Bank of India’s target band.
The Consumer Price Index (CPI) inflation rose to 1.33 per cent in December, up from 0.7 per cent in November, marking the second consecutive quarter in which inflation undershot the RBI’s 2–6 per cent target range.
Reacting to the data, Dipti Deshpande, Principal Economist at CRISIL, said, “The uptick in inflation was driven by food prices as the favourable base effect gradually waned. Food inflation rose to –2.7 per cent in December from –3.9 per cent in November, with prices of meat, fish and eggs firming up, while deflation in vegetables, pulses and spices narrowed.”
She noted that the protein basket — comprising pulses, eggs, meat and fish — which had seen inflation fall to –5.1 per cent in July, rose to –2.2 per cent in December. Cereals inflation slipped into negative territory for the first time since September 2021, driven by falling wheat and rice prices. Inflation in edible oils eased sharply to 6.8 per cent from a peak of 21.2 per cent in August, while vegetable deflation narrowed to –18.5 per cent from –27.6 per cent in October.
CRISIL flagged a sharp rise in non-food inflation, led by precious metals. Inflation in gold, silver and ornaments surged to 70.4 per cent in December, with gold inflation at 68.7 per cent and silver inflation at 97.1 per cent, contributing to the rise in core inflation.
Core inflation increased to 4.6 per cent in December from 4.3 per cent in November. However, after excluding gold, core inflation rose only marginally to 2.55 per cent from 2.5 per cent, indicating that underlying inflation pressures remain muted. Goods inflation excluding gold remained low at 2.2 per cent, compared with services inflation slightly above 3 per cent, supported by GST rate cuts and benign global commodity prices.
CRISIL said several segments continued to benefit from GST pass-through, with fast-moving consumer goods inflation softening to 2.7 per cent, large electronics seeing deeper deflation at –2.7 per cent, and automobiles recording deflation of –3.6 per cent. Within food, inflation in prepared meals, snacks and sweets eased to 3.5 per cent.
Looking ahead, CRISIL expects CPI inflation to inch up further as food base effects fade. Inflation is projected to rise to around 5 per cent in FY27, from an estimated 2.5 per cent in the current fiscal, as food inflation normalises. Weak global crude prices are expected to keep fuel inflation contained, while the lingering impact of GST rate cuts should help cap core inflation into the first half of the next fiscal.
