Honestly, walking into a local Sabzi Mandi right now feels a bit like a prank. You hear the news saying the inflation level in india is at some historic low—we’re talking 1.33% according to the latest December 2025 numbers—but then you look at the price of pulses or that specific brand of cooking oil you like, and the math just doesn't add up.
It’s a weird time for the Indian wallet. On paper, we are in a "Goldilocks period." That’s the fancy term economists like use when growth is high and inflation is low. But if you’re trying to manage a household budget in Mumbai or Delhi, "Goldilocks" feels more like a fairy tale than a financial reality.
The Gap Between Official Numbers and Your Grocery Bill
So, here’s the deal. The Ministry of Statistics & Programme Implementation (MoSPI) just dropped the data for December 2025. It shows that the retail inflation level in india, measured by the Consumer Price Index (CPI), ticked up to 1.33%.
Now, compared to the 5% or 6% levels we were seeing a couple of years ago, 1.33% sounds like a dream. It’s well below the Reserve Bank of India’s (RBI) medium-term target of 4%. In fact, for most of the latter half of 2025, inflation was actually hovering below the 2% mark.
But why does it still feel expensive?
The answer lies in the "base effect" and how we weight things. A huge chunk of the recent "low" inflation was actually food deflation. Basically, because vegetable prices were insanely high in 2024, the slight cooling off in 2025 made the percentage change look tiny. But "lower inflation" doesn't mean prices are going down; it just means they are rising more slowly.
What’s actually driving the 1.33% figure?
- Food prices: For the first time in a while, we saw food deflation in late 2025. In November, it was around -3.91%. That’s a massive reason the headline number stayed so low.
- The Gold Spike: If you bought jewelry for a wedding recently, you know. Core inflation—which strips out volatile food and fuel—actually jumped to a 28-month high of 4.8% in December. Why? Because gold and silver prices have absolutely gone through the roof, surging nearly 70% and 90% respectively year-on-year.
- GST Rationalization: The government tweaked some GST slabs in late 2025, which helped keep the cost of manufactured goods and some services in check.
RBI and the "Wait-and-Watch" Game
Governor Sanjay Malhotra and the Monetary Policy Committee (MPC) have been pretty aggressive. They cut the repo rate to 5.25% in December 2025.
That’s great for your home loan EMIs, but don't expect another cut immediately in February 2026. The big talk in Mumbai’s banking circles right now isn't just about the current inflation level in india, it’s about the "Base Year Revision."
We are currently using a 2012 base year for our inflation math. That’s ancient in economic terms. Think about it: in 2012, how much of your budget went to data recharges or streaming services? Probably zero. The government is about to roll out a new CPI series with a 2024 base year. This will change the "weights" of what we buy—giving more importance to things like smartphones and health, and maybe a little less to just basic grains.
The 2026 Outlook: Is the party over?
Most experts, including those at HDFC and Kotak, think the "lowest lows" are behind us. Here is what the rest of 2026 likely looks like:
- Crude Oil Relief: There is some genuine good news here. SBI Research is predicting Brent crude could drop toward $50 a barrel by mid-2026. Since India imports the vast majority of its oil, this is a massive "get out of jail free" card for our inflation levels.
- Food Recovery: The deflation in vegetables can't last forever. As we move into 2026, we expect food prices to stabilize and start a modest climb of about 5%.
- The 4% Anchor: While we are at 1.33% now, the consensus is that we will gravitate back toward the 4% mark by the end of the year.
Why Your "Personal Inflation" is Higher
If you feel like the inflation level in india is a lie, you aren't crazy. The RBI does an "Inflation Expectations Survey" where they ask regular households what they think the rate is.
In the latest December round, most families felt inflation was actually around 6.6%.
Why the massive gap? Because the official index counts everything from the price of a tractor to the price of a stamp. You, however, feel inflation through the lens of things you buy every day: milk, school fees, and car service costs. Those "services" often get more expensive even when the price of wheat is falling.
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What you should do about it
Navigating this "low inflation" period requires a bit of a strategy shift. You can’t just sit on cash and hope for the best.
- Lock in your Debt: With the repo rate at 5.25%, it’s a good time to look at your floating-rate home loans. If you’ve been waiting to refinance, the window is open, but it might start closing by late 2026 if the RBI shifts back to a neutral stance.
- Watch the Gold Trap: Don't let the high core inflation scare you into buying gold at peak prices. The 4.8% core inflation is heavily skewed by precious metals. If you're investing, look at the underlying "non-gold" core, which is still a very manageable 2.3%.
- Budget for Services: While goods (like electronics or clothes) are staying cheap thanks to GST cuts and global trends, service costs (education, medical, domestic help) are quietly creeping up. That’s where the "real" inflation is hiding.
The inflation level in india is currently a tale of two cities. On one hand, the macro-data looks the best it has in a decade. On the other, the specific items we love—gold, specific pulses, and quality services—are still feeling the pinch.
Stay skeptical of the 1.33% headline, but use the lower interest rate environment to your advantage while it lasts.
Actionable Next Steps:
- Audit your EMI: Check if your bank has passed on the December 25-basis-point rate cut to your home or car loan.
- Diversify beyond Gold: With gold at historic highs driving the core inflation spike, consider rebalancing into equity or debt funds that benefit from the 7.3% GDP growth forecast.
- Track the New CPI Series: Keep an eye out for the February data release; the new 2024 base year will give you a much more accurate picture of how your actual cost of living is changing.