New Delhi, February 23 Reserve Bank of India Governor Sanjay Malhotra said on Monday that the new CPI inflation series based on 2024 prices will better reflect Indian households' consumption patterns and reduce volatility.
In both ways, it will help in better CPI estimation, he said at a media briefing, following the post-Budget meeting of the RBI Central Board of Directors with Finance Minister Nirmala Sitharaman here.
Data released on February 12 showed retail inflation was 2.75 per cent in January, according to the new CPI series, which uses 2024 as the base year.
The Ministry of Statistics and Programme Implementation released the new CPI series, which widens coverage and tracks prices of 358 items, sharply up from 299 items in the old series.
Headline inflation in January, the first month based on the new series, was above the lower end of the RBI's tolerance band of 2-6 per cent, a first since June 2025.
It averaged 2.2 per cent in 2025, according to both the new and old series.
"If the whole methodology is changing, then obviously the target will undergo a change," Malhotra said while commenting on the expected changes to CPI projection from the new series.
"The next estimate that we give out in the April policy will certainly take into account all the changes that are being brought in," he said.
The change in methodology for computing headline CPI also comes when the central bank's flexible inflation targeting regime is up for review.
The government, in consultation with the RBI, determines the CPI inflation target once every five years.
Under the monetary policy framework, the government has set a 4 per cent CPI inflation target from April 1, 2021, to March 31, 2026, within a tolerance band of 2 per cent to 6 per cent.
According to the RBI Governor, the central bank has already submitted its recommendation to the government, following the stakeholder views, and it is still under examination by the government.
"The government will very quickly be coming out with the target," he said.
He, however, said that "merely because of the change in CPI series", the target may not change.
The RBI had released a discussion paper on August 21, seeking views on four questions, including whether the 4 per cent inflation target was optimal for balancing growth with stability in India.
While emphasising that the flexible inflation targeting (FIT) regime has been successful, the central bank is also looking at whether core inflation would be the best guide for monetary policy.
Following a Monetary Policy Framework Agreement with the government in 2015, India formally adopted the inflation targeting framework in 2016. The government has mandated the RBI to maintain a Consumer Price Index (CPI) inflation target of 4 per cent with a tolerance band of +/- 2 per cent during 2016-21.
The same parameters were retained for the subsequent five years (April 1, 2021, to March 31, 2026).
The RBI governor-headed six-member Monetary Policy Committee (MPC) determines the policy rate required to achieve the inflation target.
Against the backdrop of the next review of the target to be effective from April 1, 2026, and the significant changes in the global and domestic economic environment, the RBI said it has undertaken a review of the nature and format of the inflation target.
Asked about moderation in reserve of US securities, Malhotra said, "There is no conscious call to reduce our holdings in the US securities. I think what you are referring to is the increase in gold holdings because of changes in valuations".
"The US dollar has, as you are aware, weakened. So, most of the changes that you have seen are because of changes in valuation," he added.
