India's Consumer Price Inflation Moderates to 1.33% in December, Below Estimates

India's consumer price inflation (CPI) moderated to 1.33% in December, undershooting market expectations and providing relief on the inflation front. The latest data released on Monday showed inflation coming in below the CNBC-TV18 poll estimate of 1.62%, though sequential pressures emerged beneath the headline print.

Food Prices Drive Softer Inflation Outcome

Food prices remained the key driver behind the softer inflation reading. Food inflation stood at -2.71% in December, significantly lower than the CNBC-TV18 poll estimate of -1.3%. However, this represented a narrowing from the sharper -3.91% contraction recorded on a month-on-month basis.

Vegetables continued to experience steep deflation at -18.47%, while pulses inflation remained deeply negative at -15.09%. Both categories showed slight easing from the previous month's levels.

Urban-Rural Inflation Dynamics

The December data revealed divergent trends between urban and rural inflation patterns. Rural inflation rose to 0.76% on a sequential basis, marking an increase from 0.10% in the previous period. Urban inflation showed a more pronounced increase, rising to 2.03% from 1.40%, indicating firmer price pressures in cities.

Other Key Categories Show Mixed Trends

Across other major inflation categories, the data showed generally moderating trends. Fuel and light inflation cooled marginally to 1.97% from 2.32% on a month-on-month basis. Housing inflation edged lower to 2.86%, while clothing and footwear inflation also eased slightly to 1.44% from 1.49%.

Sequential Pressures Emerge

While the headline CPI figure showed moderation on an annual basis, inflation rose on a month-on-month basis from 0.71% to 1.33%, pointing to emerging sequential pressures. This suggests that while year-over-year comparisons remain favorable, recent monthly trends indicate some firming in price pressures.

The December inflation data highlights continued relief from food prices, which have been a significant factor in keeping overall inflation subdued. However, the gradual firming in core and urban inflation trends suggests that underlying price pressures may be building, warranting close monitoring in the coming months.