You’ve probably noticed something weird lately. While the news says the current rate of inflation India is at historic lows, your local grocery run still feels like a gamble. One week tomatoes are basically free, the next they’re priced like precious metals. Honestly, it’s a bit of a headscratcher.
The official data dropped just a few days ago, on January 12, 2026. According to the Ministry of Statistics and Programme Implementation (MoSPI), India’s retail inflation—measured by the Consumer Price Index (CPI)—edged up to 1.33% in December 2025.
That sounds tiny. Because it is.
But here’s the kicker: even though it “rose” from the 0.71% we saw in November, we are living through what RBI Governor Sanjay Malhotra calls a "Goldilocks period." It’s that rare moment where the economy is growing fast (GDP is cruising at over 7%) but prices aren't spiraling. In fact, for the last four months of 2025, inflation stayed well below the RBI’s medium-term target of 4%.
Why the current rate of inflation India is behaving so strangely
If you look at the numbers, you’ll see a massive divide between what you eat and what you use. Food prices have actually been in "deflation" for seven months straight. That basically means, on average, food was cheaper in December 2025 than it was in December 2024.
Specifically, food inflation hit -2.71%.
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Wait, if food is getting cheaper, why did the overall rate go up?
It’s mostly about "base effects." Last year’s prices were the starting point, and since they were quite high, the comparison makes today's prices look lower. Plus, things like personal care, meat, and eggs started creeping up in December.
The Veggie Rollercoaster
Vegetables are the wild card in India. In December, vegetable prices were technically 18.47% lower than a year ago. But if you compare December to November, the price of tomatoes actually jumped by about 14%.
It’s a localized mess. One state, like Kerala, might be seeing inflation near 9.5%, while others are barely seeing prices move.
The big 2024 "Reset" coming in February
Here is something most people are missing. We are currently measuring inflation using a "basket" of goods from 2012. Think about that. In 2012, how much did you spend on data plans? Probably not much. How much did you spend on streaming services or EVs? Zero.
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The government is finally fixing this.
On February 12, 2026, they are ditching the 2012 base year and moving to a 2024 base year. This is huge. It will change the weights of what we measure. Right now, food makes up nearly 50% of the index. In reality, as we’ve gotten wealthier, we spend a smaller chunk of our income on basic grains and more on health, education, and gadgets.
The new series will likely show a more "modern" version of the current rate of inflation India, and experts at Barclays and HDFC Bank are watching this like hawks.
What the RBI is doing with your EMI
Because inflation has been so "tame" (honestly, almost too low for the RBI's liking), the central bank has been cutting interest rates.
They slashed the repo rate to 5.25% back in December 2025.
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If you have a home loan or a car loan, this is the number that matters. A lower repo rate usually means your bank eventually lowers your EMI. There’s a catch, though. Some economists, like Aditi Nayar from ICRA, think the RBI might hit the "pause" button in their February 2026 meeting. They want to see that new 2024 data before they make money even cheaper.
The "Farmers vs. Consumers" Dilemma
While we celebrate low prices at the till, there’s a darker side to the current rate of inflation India.
Cereal prices just slipped into deflation (-0.4%) for the first time in over four years. For you and me, that’s great news for the monthly budget. For a farmer in Punjab or Madhya Pradesh? It’s a disaster. When prices drop too low, rural income vanishes. This "rural-urban gap" is something the government is worried about. If farmers aren't making money, they don't buy tractors, clothes, or motorcycles, which eventually slows down the whole economy.
Key Factors to Watch in Early 2026:
- The 2026 Union Budget: Scheduled for February 1. Any new taxes or subsidies will shift the needle instantly.
- Global Oil: Crude has stayed relatively low, which is the only reason our "Fuel and Light" inflation isn't screaming right now.
- The New CPI Series: As mentioned, the February 12 data release is the "reset" button for Indian economics.
How to manage your money right now
Honestly, don't let the low 1.33% figure fool you into thinking "everything is cheap." Core inflation—which ignores volatile food and oil—is still sitting around 2.6% to 4.6% depending on how you calculate it (with or without gold).
- Fixed Deposits (FDs): With the RBI potentially cutting rates one last time to 5.0% later this year, now might be the best time to lock in those higher FD rates before they drop further.
- Equity Markets: Low inflation and high growth are usually fuel for the stock market. The Sensex and Nifty have been trending up because companies aren't struggling with high raw material costs.
- Gold: This is the outlier. Gold prices have been rallying, which pushed "Personal Care and Effects" inflation higher in December. If you’re buying jewelry for a wedding, the "low inflation" headline won't help you there.
The current rate of inflation India is a bit of a statistical mirage—it looks incredibly low because of the way we measure it, but the reality on the ground is shifting as we move toward a new economic era.
Practical Next Steps:
- Audit your subscriptions: Since the "new" inflation basket will focus more on services, take a look at your own "modern" basket. Are you overpaying for digital services that have crept up in price while you were focused on the price of onions?
- Refinance check: If your home loan is still linked to an old benchmark, talk to your bank about switching to an External Benchmark Linked Rate (EBLR) to take advantage of the 125 basis point cuts the RBI made over the last year.
- Watch the February 12th data: This will be the first time we see the 2024-based CPI. It will be the most accurate reflection of your actual cost of living in over a decade.