New Delhi: India introduced a new series of the Consumer Price Index (CPI), the benchmark for tracking retail inflation, with January inflation recorded at 2.75 per cent under the revised base year of 2024.

The updated CPI series, released by the National Statistics Office (NSO) under the Ministry of Statistics and Programme Implementation, on Thursday, expands the basket of goods and services, revises weightages and widens market coverage. The overhaul aims to better reflect current consumption patterns and improve the quality of inflation data used in framing monetary policy and fiscal policy.

RBI awaits new CPI data for policy calibration

The Reserve Bank of India (RBI), which uses CPI inflation as the primary anchor for interest rate decisions, had deferred its inflation projections for the next financial year pending the release of the new CPI series. The central bank is mandated to keep retail inflation at 4 per cent, with a tolerance band of 2 per cent on either side.

Chief Economic Advisor V Anantha Nageswaran said the revised index will provide a stronger information base for policy formulation.

“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,” he said, adding that the broader services and digital market coverage enhance assessment of real incomes and purchasing power.

Food and housing inflation were moderate in January

Under the new series, food inflation stood at 2.13 per cent in January, while housing inflation was recorded at 2.05 per cent.

Headline inflation in rural areas came in at 2.73 per cent and urban inflation at 2.77 per cent.

Among states, Telangana reported the highest inflation at 4.92 per cent, followed by Kerala and Tamil Nadu.

Items witnessing low inflation included garlic, onion, potato, arhar (tur dal) and peas. In contrast, higher price pressures were seen in silver jewellery, tomato, coconut-copra, gold, diamond, platinum jewellery and coconut oil.

 

Base year revised to 2024; basket expanded

The CPI base year has been revised from 2012 to 2024 using data from the Household Consumption Expenditure Survey (HCES) 2023–24.

The revised series expands the item basket from 299 to 358 items, comprising 308 goods and 50 services. Price data is now collected from 1,465 rural markets, 1,395 urban markets and 12 online marketplaces.

The classification structure has been widened from six to 12 groups to provide greater granularity. Newly delineated categories include furnishings and household maintenance, health, transport, information and communication, recreation and culture, education services, restaurants and accommodation, and personal care and social protection.

The weight of food and beverages has been reduced to 36.75 per cent from 45.86 per cent, potentially moderating headline volatility. Housing, now expanded to include utilities, carries a weight of 17.67 per cent. Clothing and footwear weight has declined to 2.38 per cent, while paan, tobacco and intoxicants have risen to 2.99 per cent.

Index values under the new base are available from January 2025, making year-on-year comparisons feasible from January 2026 onwards. A linking factor enables back-calculation to 2013.

Economists see limited near-term policy impact

Aditi Nayar, Chief Economist at Icra, said the January CPI print of 2.75 per cent was below the mid-point of the RBI’s target range of 2–6 per cent.

She noted that the new CPI series is not directly comparable with the old one due to changes in composition and methodology, although the reduced weight of food and beverages was expected to alter the headline trajectory.

Madhavi Arora, Chief Economist at Emkay Global Financial, said the revised inflation data is unlikely to materially shift monetary policy in the near term, pointing to a cyclical recovery in growth and inflation.

Rajeev Sharan of Brickwork Ratings observed that core inflation, estimated at 3.1 per cent, indicates sustained momentum in services and personal care segments. The revised weight structure, he said, may lead to structurally softer headline prints but clearer visibility on demand-side pressures, allowing the RBI to remain accommodative while monitoring sticky core inflation.

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said while the inflation trajectory remains benign, the RBI’s rate-cut cycle may have concluded, with an extended pause likely through calendar year 2026.

The introduction of the 2024-based CPI series marks a significant structural shift in India’s inflation measurement framework, aligning retail inflation data more closely with evolving consumption trends and the modern digital economy.

PTI