Gold, coconut oil and consumption: Inside Kerala’s inflation streak

With the state reporting the highest inflation rates in India, Himanshi Bhardwaj explains why this is happening and how it could impact the polls

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Kerala's retail inflation rate in December 2025 has cemented its unwanted top spot among Indian states, rising to 9.49 per cent after seven consecutive months of leading the inflation charts.

The spike sharply contrasts with an all-India average inflation rate of 1.33 per cent, and dwarfs readings in other states — Goa and Karnataka, the next highest, posted relatively muted inflation rates of 3.18 per cent and 2.99 per cent, respectively, in December.

The state’s retail inflation accelerated from 8.27 percent in November to hit the highest state-level inflation point in 12 months, since Manipur’s 10.12 per cent in December 2024.

Kerala’s consumer price index (CPI) has climbed relentlessly since June 2025, when it topped state rankings at 6.76 per cent against India’s average of 2.1 per cent. According to inflation numbers, rural areas have borne the brunt, with December inflation hitting 10.77 percent, compared to 7.13 per cent in urban zones. This gap persisted through the second half of 2025, with inflation in rural areas hovering above 9-10 percent from July onwards, while figures for urban zones staying below 7.2 per cent.

According to Madhavankutty G, chief economist at Canara Bank, the rural-urban inflation divide is not quite stark as the highly urbanised nature of the state suggests that there are hardly any rural pockets in the strict sense of the term like in North India.