New Consumer Price Index (CPI) series
Kartavya Desk Staff
Source: IE
Subject: Economy
Context: The Union Ministry of Statistics and Programme Implementation (MoSPI) has released details of a new Consumer Price Index (CPI) series, revising the base year from 2011–12 to 2023–24 and cutting the weight of food and beverages from ~46% to ~37%.
About New Consumer Price Index (CPI) series:
What is the new CPI series?
The new CPI series is an updated framework for measuring retail inflation in India, with:
• Base year revised from 2011–12 to 2023–24
• Revised item weights based on the latest Household Consumption Expenditure Survey (HCES) 2023–24
• Expanded item coverage and improved methodology to better capture current consumption behaviour, including digital services.
CPI is India’s headline inflation measure and the anchor for monetary policy under the inflation targeting framework.
Organisations involved:
• Nodal Ministry: Ministry of Statistics and Programme Implementation (MoSPI)
• Data source: Household Consumption Expenditure Survey (HCES) 2023–24
Historical background of CPI in India:
• CPI (Combined: Rural + Urban) introduced in 2011–12 as the primary inflation indicator.
• The basket weights were earlier based on 2011–12 consumption patterns, which became outdated due to: Rising incomes Urbanisation Shift towards services, housing, transport, and digital consumption
• Rising incomes
• Urbanisation
• Shift towards services, housing, transport, and digital consumption
• Periodic base-year revision is standard international practice to maintain accuracy.
Criteria / methodology of the new CPI series:
The revised CPI is constructed using:
• HCES 2023–24 consumption shares (rural & urban)
• Expanded market coverage: 1,465 rural markets and 1,395 urban markets across 434 towns Addition of 12 online markets in large cities
• 1,465 rural markets and 1,395 urban markets across 434 towns
• Addition of 12 online markets in large cities
• Item basket expanded from 299 to 358 items
• Improved House Rent Index methodology, including: Extension of rent coverage to rural areas Exclusion of employer-provided accommodation
• Extension of rent coverage to rural areas
• Exclusion of employer-provided accommodation
• Inclusion of e-commerce prices (airfares, OTT subscriptions, telecom plans)
Key features of the new CPI series:
• Reduced food weight: Food + beverages weight falls from 86% to ~36.5–36.75% Reflects Engel’s Law: rising incomes → lower food share in expenditure
• Food + beverages weight falls from 86% to ~36.5–36.75%
• Reflects Engel’s Law: rising incomes → lower food share in expenditure
• Higher housing weight: Housing (including water, electricity, gas) rises from 07% to 17.66%
• Greater services representation: Transport, health, education, communication gain prominence
• Digital economy inclusion: Prices from OTT platforms, telecom plans, online airfares included
• Lower inflation volatility: Reduced sensitivity of headline inflation to weather-driven food shocks
Significance of the new CPI series:
· Better inflation measurement: Captures current consumption realities, making inflation data more credible.
· Relief for monetary policy: Lower food weight reduces noise from supply-side shocks, aiding RBI’s interest-rate decisions.
· Reflects structural transformation: Signals India’s transition from food-dominated consumption to housing- and services-led spending.