NEW DELHI — Consumer price inflation (CPI) in India accelerated to 1.33% in December, up from 0.71% the previous month, driven largely by rising food costs. Despite the uptick, the figure came in softer than the 1.5% forecast anticipated by economists in a Reuters poll.

According to the Ministry of Statistics and Programme Implementation, the primary drivers for the increase were surging prices in vegetables, meat, fish, eggs, pulses, and personal care items. While the headline number rose, relief was seen in the fuel and light category, where inflation eased to 1.97%, down from 2.32% in November.

The data revealed a divergence between sectors, with urban inflation rising sharply to 2.03% compared to a modest 0.76% increase in rural areas.

Analysts believe the lower-than-expected print leaves room for monetary easing. Anubhuti Sahay, head of India Economics Research at Standard Chartered Bank, noted that the data likely keeps “hopes of one last rate cut alive.” However, she emphasized that the Central bank’s assessment of the inflation trajectory will improve after the implementation of the new CPI series—based on the year 2024—which is set to launch on February 12.

The Reserve Bank of India (RBI) has adjusted its outlook, currently projecting consumer inflation at 2% for the fiscal year ending March 2026, a revision from its earlier October forecast of 2.6%. The Central bank estimates inflation will average 2.9% in the current quarter before rising to 4.0% by September 2026.

The prolonged period of low inflation during 2025 has weighed on nominal GDP growth, sparking concern among investors and policymakers. Government estimates released last week peg real GDP growth for fiscal year 2026 at 7.4%, but nominal GDP growth is projected at just 8.0%—significantly missing the Union Budget’s 10.1% target.

Rana Gupta, managing director of Indian Equities at Manulife Investment Management, flagged the slowdown in nominal GDP as a key worry, noting that corporate earnings growth has slipped to 9-10% from previous levels of 12-13%. Gupta suggested that nominal GDP growth could rebound to the 10-11% range in fiscal year 2027 as inflation begins to pick up.