New Delhi, February 12 – India on Thursday launched a new series of its Consumer Price Index (CPI), the benchmark that tracks retail inflation. This change will improve the quality of data used in formulating monetary and fiscal policies, according to Chief Economic Advisor V Anantha Nageswaran.
The new index will reflect changes in spending patterns since the last overhaul, which was conducted more than a decade ago.
The CPI under the new series shows a 2.75% increase in January, according to data released by the Ministry of Statistics and Programme Implementation.
The base year has been updated to 2024 from 2012, while the coverage has been expanded to 358 items from 299 – including 308 goods and 50 services – with price data now collected from 1,465 rural and 1,395 urban markets, as well as 12 online marketplaces. The new CPI series expands the classification from six to 12 groups, adding several standalone categories to provide greater granularity.
The weight of food and beverages has been reduced to 36.75% from 45.86%, potentially reducing headline volatility. Housing, which now includes utilities, has a 17.67% weight. Paan, tobacco, and intoxicants have risen to 2.99%, while clothing and footwear have fallen to 2.38%.
Index values under the new series are available from January 2025, making year-on-year inflation comparable only from January 2026. A linking factor allows back-calculation to 2013.
Newly delineated groups include furnishings, household equipment, and routine household maintenance (4.47%), health (6.1%), transport (8.8%), information and communication (3.61%), recreation, sports, and culture (1.52%), education services (3.33%), restaurants and accommodation services (3.35%), and personal care, social protection, and miscellaneous goods and services (5.04%).
At the item level, obsolete products have been removed from the basket, while categories have been rationalized and reclassified to align with current consumption patterns under the 2024 base and COICOP framework, improving comparability and relevance.
The National Statistics Office (NSO) under the Ministry of Statistics & Programme Implementation (MoSPI) on Thursday released the new Consumer Price Index (CPI) with Base 2024=100.
The new series captures more goods and services items, and excludes those that are not currently consumed. Weights of different item groups have been recalibrated based on the Household Consumption Expenditure Survey (HCES) 2023-24.
"Since the CPI basket is now aligned with recent expenditure data, the inflation signals derived from this will be more closely matched with the economic conditions. This improves the information basis for calibrating monetary and fiscal policy," Nageswaran told reporters at a press conference on the new CPI series.
He said that the new series, with wider coverage of services and digital markets, provides policymakers with a more up-to-date basis for assessing real incomes, consumption trends, and purchasing power.
The Reserve Bank of India (RBI) factors in retail inflation while arriving at its bi-monthly monetary policy decision.
He said that if CPI volatility declines, fiscal expenditure, DA fixation, and index bonds, which are linked to CPI, would become more stable, predictable, and reliable.
The CEA said that the proportion of weights assigned to the food basket has come down from 45.86 in CPI 2012 to 36.75 in the new series.
It also reflects the reallocation of certain items to other categories, such as restaurants and services.
"At the macro level, this reflects a progressive diversification of expenditure towards health, education, mobility, and connectivity, which is what you would expect to see from an economy which is seeing rising incomes and rising living standards," Nageswaran said.
He added that lower weightage for the otherwise volatile group of food and beverages may also make the headline inflation less volatile.
Such rebalancing, he said, is typically associated with income growth, productivity gains, and improving living standards.
The revised basket also highlights the increasing role of services in consumption, he added.
"This brings consumption measurement closer to the evolving structure of output and employment, where services account for a rising share of economic activity," he said.
The new series also recognizes the growing role of digital channels in price formation and would help in better distinguishing urban and rural dynamics of inflation at the state level, and the subclass as well as item level, Nageswaran said.
He said that if CPI volatility declines, fiscal expenditure, DA fixation, index bonds, et cetera, which are linked to CPI, would become more stable, predictable, and reliable.
The new CPI series and upcoming GDP and IIP with a new base year will align Indian data with the best in the world, he added.