Retail Inflation Dips on Cheaper Food, But Relief May Be Short-Lived

• India's retail inflation for December fell to 1.33% year-on-year, lower than expected, primarily due to continued deflation in food prices.
• Food inflation entered negative territory at -2.7%, marking the seventh consecutive month of falling food prices, driven by vegetables, fruits, and cereals.
• Economists caution that this unusually low inflation print is temporary, with ICRA expecting headline inflation to rise above 2% soon.
• Core inflation, excluding gold, remains muted at 2.3–2.6%, indicating slack in demand conditions rather than a broad slowdown.
• Bond yields eased, but experts suggest bond markets are now more focused on fiscal dynamics, government borrowing, and global bond index inclusion rather than just CPI.

Why It Matters: Retail inflation dropped due to cheaper food, offering temporary relief, but economists predict a swift rebound.