New consumer inflation data to bolster policy responses: CEA Nageswaran

India’s new Consumer Price Index (CPI) series using 2024 as a base year, unveiled on Thursday, captures the transition in household consumption trends over the past decade with greater spends going towards services even as the share of food in domestic budgets declined, and will help fiscal and monetary policy makers formulate better responses to evolving economic conditions, Chief Economic Advisor V Anantha Nageswaran said. 

For January, the All-India CPI inflation rate stood at 2.75 per cent year-on-year, with rural price rise at 2.73 per cent and urban fractionally higher at 2.77 per cent. Food inflation ,which was in negative territory till December 2025 under the old series, turned positive in the new series at 2.1 per cent. 

Nageswaran said the lower weightage for the otherwise volatile group of food and beverages may make the headline inflation less volatile, ceteris paribus. “The monetary policy response in particular could become more focused on aggregate demand pressures rather than dealing with supply-induced inflation and dealing with it through a demand-sensitive variable like the interest rate,” he said, adding the new series could improve the assessment of development indicators like poverty levels, adding the new series could also improve the assessment of development indicators like poverty levels. 

With inflation now driven more by the core or non-volatile components of CPI that exclude food and energy, the CEA said the new series could help anchor inflation expectations in households and businesses. 

“If CPI volatility declines, it means that fiscal expenditure volatility such as Dearness Allowance (DA) fixation, inflation-indexed bonds, et al, which are linked to CPI could also become more stable, predictable and reliable, and this could give better budget predictability and visibility as well to fiscal numbers.” he pointed out. 

With the housing component of CPI now including rural rental costs and improving sampling coverage, the CPI now captures housing costs more accurately across regions. This leads to a better measurement of the rural cost of living, reducing the urban bias in inflation estimation, the CEA reckoned, while speaking at a Statistics ministry event to mark the launch of the new CPI series. 

“As a result, poverty estimates become more accurate since real consumption and real income calculations depend directly on CPI. Improved cost of living measurement also enhances the targeting efficiency of welfare schemes, ensuring that benefits, subsidies and social transfers are better aligned with actual regional price realities,” he stressed. 

“Reflecting Engel’s Law, the proportion of weights assigned to the food basket has come down in the new series. The weight of food and beverages has come from 45.86 per cent in CPI 2012 series to 36.75 per cent… it also reflects the reallocation of certain items to other categories more discretionary in nature such as restaurants and services. At a 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 underlined. According to Engel’s law, as one’s income rises, the proportion of income spent on food falls. 

Such rebalancing is typically also associated with income growth and productivity gains, he noted, adding it brings consumption measurement closer to the evolving structure of output and employment where services account for a rising share of economic activity. Moreover, as the new series recognises the growing role of digital channels in price formation, it would help in better distinguishing urban and rural dynamics of inflation at the state level and the sub-class and sub-item level as well, he said. 

To better capture evolving household spending patterns, amid digital and service-led growth, the Ministry of Statistics and Programme Implementation (MoSPI) on Thursday released the first print of the revamped Consumer Price Index (CPI) series with base year 2024, marking a major methodological overhaul of India’s retail inflation gauge. 

The new series replaces the earlier six-group classification with 12 divisions to align with international standards and uses the HCES 2023-24 for updating the household consumption basket. 

The number of weighted items in the basket has increased to 358 from 299 earlier. Within this, goods have risen to 308 from 259, while services have expanded to 50 from 40, indicating a notable increase in the share of services in household consumption. It adds rural housing, online media and streaming services, value-added dairy, barley products, pen drives, and exercise equipment while removing outdated items like VCRs and DVD players, radios, tape recorders, second-hand clothing. 

Emphasising the scale of the updation exercise, Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation, said this marked the culmination of a two-year long exercise. “On the ground, we have nearly 10,000 enumerators who are going week after week, month after month to collect the data. So, a lot of effort goes in, on the part of the enumerators,” he noted. 

The ministry plans to institutionalise base revisions of CPI at regular intervals. “We did the last household consumer expenditure survey in 2023-2024 and we have programmed to have the next one in 2027-2028. The international norm is to revise these macroeconomic indices every five years and we hope to be able to follow that,” informed Garg. 

The CEA said with the new data sets, including the upcoming revision in national accounts due in a few weeks’ time, India “may even be going one step ahead of others in the way we will be collating, compiling and presenting key macroeconomic statistics on output and prices going ahead”.