Retail food inflation in India stays in deflation for seventh month

Retail food inflation in India remained in the negative zone for the seventh consecutive month in December 2025, printing at –2.71% year-on-year, largely on account of a favourable base effect and a sharp fall in prices of key commodities such as vegetables and pulses. While the continued deflation has offered relief to consumers, recent trends suggest that the phase may be nearing its end.

On a sequential basis, food inflation edged up from –3.91% in November, indicating that prices of several food items have begun to firm. The Consumer Food Price Index (CFPI) declined marginally by 0.24% in December compared to November 2025, highlighting a slower pace of price correction. In contrast, food inflation stood at a high 8.39% in December 2024, underlining the sharp turnaround witnessed over the past year. Food inflation has remained in deflationary territory since June 2025.

Vegetables continued to be the biggest driver of deflation, though the intensity moderated. Inflation in the vegetable category stood at –18.47% in December, compared to –22.2% in November, reflecting some recovery in prices. Pulses also remained deeply deflationary, with prices declining by 15.09% year-on-year for the 11th consecutive month. This sustained decline has been supported by expectations of a robust kharif harvest, encouraging rabi sowing, and adequate carry-forward stocks held by the government, trade, and private entities.

Within pulses, arhar prices continued to see a sharp decline, remaining in the negative zone since January 2025. In December, arhar inflation stood at –28.48%, driven by a high base effect, record domestic production, and increased imports. This marks a dramatic reversal from August 2024, when pulses inflation had peaked at an extraordinary 113%.

However, not all food categories mirrored this softness. Edible oils and fruits recorded elevated inflation at 6.75% and 6.66% respectively in December. Inflation in mustard oil and refined oil stood at 8.23% and 3.92% year-on-year, largely reflecting higher global prices. India imports nearly 58% of its edible oil requirements, making domestic prices vulnerable to international market movements.

Cereals offered continued stability. Overall cereal inflation eased to 0.35%, staying in single digits for several months due to softer rice prices. Rice inflation declined by 1.26% year-on-year, while wheat inflation moderated to 0.66%, compared to a contraction of 0.33% in November.

Protein-rich items added to upward pressure. Inflation in the meat and fish category came in at 5.12% in December. Chicken prices rose sharply, with inflation jumping to 6.22% from just 0.36% in November. Egg inflation remained moderate at 4.76%. Meanwhile, spices continued to see deflation, declining by 2.15%, with jeera prices falling sharply by 13.37%.

Madan Sabnavis, Chief Economist at Bank of Baroda, noted that food inflation remained negative at –2.7%, driven mainly by vegetables and pulses, but cautioned that inflation above 5% in meat products, oils, and fruits would continue to exert upward pressure in the coming months. An official statement also attributed the December uptick to rising prices of vegetables, meat and fish, eggs, spices, and pulses.

Looking ahead, analysts expect the deflationary phase to end soon. Rating agency ICRA anticipates that the food and beverage segment will revert to inflation in January 2026, after remaining in deflation in six of the last seven months, signalling a gradual normalisation of food prices.