For India’s agricultural and rural labourers—among those most exposed to rising prices—the close of 2025 has brought a rare sense of economic relief. Official data released by the Ministry of Labour & Employment shows that food inflation remained in the negative zone in December, signalling a sustained cooling of prices in rural India.
Inflation based on the Consumer Price Index for Agricultural Labourers (CPI-AL) was estimated at 0.04 per cent, while that for Rural Labourers (CPI-RL) stood at 0.11 per cent year-on-year. More significantly, food inflation—an essential component of household spending—declined to (-)1.8 per cent for agricultural labourers and (-)1.73 per cent for rural labourers during the month.
What Is Food Inflation and Why It Matters
Food inflation measures the change in prices of everyday food items such as cereals, vegetables, pulses, milk, edible oils, and meat over a period of time. For rural households, food accounts for a large share of monthly expenditure, making them particularly sensitive to price fluctuations.
When food inflation rises, families are forced to spend more just to maintain basic consumption, leaving little room for healthcare, education, or savings. Conversely, when food inflation falls—or turns negative—it means food prices are easing, allowing households to stretch their incomes further and improve overall quality of life.
Production Gains Drive Price Stability
The continued decline in food inflation during December was largely driven by improved agricultural output, which helped stabilise prices across several essential commodities. Higher availability reduced pressure on household budgets and increased purchasing power among farm and rural workers.
Economists note that this trend is especially beneficial for wage-dependent labourers, who are often the first to feel the impact of price spikes but the last to see wage adjustments.
A More Robust Inflation Index
Another significant development has been the revision of the base year for CPI-AL and CPI-RL to 2019=100, replacing the decades-old 1986-87=100 series. The updated indices are based on price data collected from 787 villages across 34 states and Union Territories, offering a more accurate reflection of today’s rural consumption patterns.
The revised framework expands the consumption basket to 150–200 items, up from fewer than 110 earlier, and introduces methodological improvements such as calculating prices of Public Distribution System (PDS) items based on eligibility rather than availability. These changes are expected to make rural inflation tracking more realistic and policy-relevant.
Broader Inflation Remains Under Control
At the national level, India’s overall retail inflation edged up slightly to 1.33 per cent in December 2025, compared to 0.71 per cent in November. Despite the increase, inflation remains comfortably low by historical standards.
Reflecting this benign outlook, the Reserve Bank of India has revised its inflation forecast for FY 2025-26 to 2 per cent, citing falling food prices and the impact of recent GST rate cuts. The central bank has also reduced the repo rate by 25 basis points to 5.25 per cent, shifting its policy focus toward supporting economic growth.
Why This Matters
Sustained low food inflation can have far-reaching effects—improving nutrition, boosting rural consumption, and supporting demand across the economy. For millions of agricultural and rural labourers, stable food prices are not just an economic statistic but a meaningful improvement in daily life.
As long as supply conditions remain favourable and inflation stays in check, rural India may continue to enjoy a period of relative price stability—an outcome that policymakers and households alike have long hoped for.