{"id":84870,"date":"2026-01-30T11:38:55","date_gmt":"2026-01-30T06:08:55","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=84870"},"modified":"2026-01-30T11:38:55","modified_gmt":"2026-01-30T06:08:55","slug":"indias-new-cpi-series","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/indias-new-cpi-series\/","title":{"rendered":"India\u2019s New CPI Series: Food Weight Cut, Housing Gains"},"content":{"rendered":"<h2><b>New CPI Series Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to documents released by the Ministry of Statistics and Programme Implementation (MoSPI), India\u2019s revised Consumer Price Index, with <\/span><b>2024 as the base year<\/b><span style=\"font-weight: 400;\">, will significantly <\/span><b>lower <\/b><span style=\"font-weight: 400;\">the weight of food and beverages from 45.86% to 36.75%.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At the same time, <\/span><b>housing <\/b><span style=\"font-weight: 400;\">will account for a <\/span><b>larger share<\/b><span style=\"font-weight: 400;\"> of the CPI basket. Along with improved methods to measure rent increases, this change is expected to push up measured housing inflation and place upward pressure on headline retail inflation.<\/span><\/li>\n<\/ul>\n<h2><b>Why Food\u2019s High Weight in CPI Has Been a Concern<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Food items account for a large share of India\u2019s Consumer Price Index (CPI), meaning sharp swings in food prices often dominate headline inflation, pushing it up or down irrespective of broader price trends.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">From June 2025, food inflation turned negative, with prices consistently lower than a year earlier.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This sharply pulled down headline CPI inflation, which fell to an all-time low of 0.25% in October 2025, alongside record-low food inflation of \u20135.02%.<\/span><\/li>\n<\/ul>\n<h3><b>Impact of New CPI Weights on Inflation Readings<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to experts, recalculating CPI with new weights but unchanged indices suggests:<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Overall CPI could be 20\u201330 basis points higher when food inflation is low.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In periods of high food inflation, CPI could be 20\u201330 basis points lower than under the current series.<\/span><\/li>\n<\/ul>\n<h3><b>Why RBI Has Been Uneasy with the Current CPI<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For the Reserve Bank of India, the heavy food weight is problematic because the existing CPI is based on 2011\u201312 consumption patterns, making it outdated and less representative of today\u2019s economy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">As per <\/span><b>Ernst Engel\u2019s economic theory<\/b><span style=\"font-weight: 400;\">, the share of income spent on food declines as incomes rise. This trend is reflected in recent Indian data.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The updated CPI basket draws on the MoSPI\u2019s 2023\u201324 Household Consumption Expenditure Survey (HCES):<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Rural households: food share fell from 52.9% (2011\u201312) to 47.04% of monthly per capita consumption.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Urban households: food share declined from 42.62% to 39.68%.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Falling food shares in household spending underline why reducing food\u2019s weight in the CPI is seen as necessary\u2014to make inflation data more stable, current, and reflective of actual consumption patterns in India today.<\/span><\/li>\n<\/ul>\n<h2><b>Relief for RBI from Lower Food Weight in CPI<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI influences inflation mainly by <\/span><b>managing demand<\/b><span style=\"font-weight: 400;\"> through interest rates.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, it has <\/span><span style=\"font-weight: 400;\">limited ability to address supply-side shocks in food prices<\/span><span style=\"font-weight: 400;\">, as rate changes cannot quickly alter the supply of vegetables, cereals, or other food items.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In the past, episodes of high food inflation have kept headline inflation elevated, preventing the RBI from cutting interest rates even when underlying demand conditions were weak. This has <\/span><b>complicated<\/b><span style=\"font-weight: 400;\"> monetary policy decision-making.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Against this backdrop, the <\/span><b>Economic Survey 2023\u201324<\/b><span style=\"font-weight: 400;\"> suggested exploring whether India\u2019s inflation targeting should focus on inflation <\/span><b>excluding food items<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI opposed this idea.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Then Governor Shaktikanta Das said that while the central bank can look through temporary food inflation, it <\/span><span style=\"font-weight: 400;\">cannot ignore persistently high food inflation<\/span><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><b>Current Inflation Targeting Framework<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">By law, the RBI must target CPI inflation at 4%, within a tolerance band of 2\u20136%, under the Flexible Inflation Targeting (FIT) framework.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This framework is currently under review, with the new target for the next five years, starting April, expected to be announced by March.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Most economists expect the FIT framework to be retained in its current form, but changes in CPI composition\u2014especially a lower food weight\u2014could give the RBI greater operational comfort in managing inflation and interest rates.<\/span><\/li>\n<\/ul>\n<h2><b>New CPI Basket: What Is Changing<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Timeline for the New CPI Series<\/b><span style=\"font-weight: 400;\"> &#8211; The broad weights of categories in the new CPI basket have been released ahead of the first inflation data under the new series, which will come out on February 12 for January. Detailed item-wise weights will be published before that.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Expanded Coverage: More Items in the Basket<\/b><span style=\"font-weight: 400;\"> &#8211; The new basket will include 358 items, up from 299 earlier\u2014reflecting changes in consumption patterns.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Reclassification of Categories &#8211; <\/b><span style=\"font-weight: 400;\">The MoSPI has reorganised CPI categories, making one-to-one comparisons (with earlier version) difficult. For example, education services now carry a 3.33% weight as a standalone category, whereas earlier education was a sub-group under \u201cmiscellaneous\u201d with a 4.46% weight.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Linking Old and New CPI Series<\/b><span style=\"font-weight: 400;\"> &#8211; To ensure continuity, the expert group recommended releasing a linking factor between CPI 2012 and CPI 2024 for all-India, rural, and urban indices with the first CPI 2024 release.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Food Weight Falls; Housing Gains Prominence<\/b><span style=\"font-weight: 400;\"> &#8211; While food\u2019s weight declines in the new series\u2014expected to reduce headline inflation volatility\u2014housing\u2019s weight rises sharply from 10.07% to 17.66%.<\/span><\/li>\n<\/ul>\n<h3><b>Why Housing Weight Is Rising<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The increase is driven by:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Expanded coverage to include residential utilities (water, electricity, gas, other fuels).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Higher spending on rent, per the 2023\u201324 HCES:<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Rural rent share rose to 0.56% (from 0.45% in 2011\u201312).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Urban rent share increased to 6.58% (from 6.24%).<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><b>Implications for Inflation<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lower food weight should reduce volatility in headline CPI.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, the higher housing weight, combined with methodological changes\u2014such as excluding employer-provided accommodation from rent measurement\u2014could push housing inflation higher, adding upward pressure to overall inflation.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b><strong> <a href=\"https:\/\/indianexpress.com\/article\/business\/new-inflation-series-weight-of-food-items-drop-37-cpi-46-10502164\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.business-standard.com\/economy\/news\/economy-inflation-weight-food-beverages-cut-new-cpi-series-2024-base-126012901838_1.html\" target=\"_blank\" rel=\"nofollow noopener\">BS<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new CPI series lowers food weight and raises housing\u2019s share, reshaping inflation measurement, easing volatility, and altering how the RBI interprets headline inflation trends.<\/p>\n","protected":false},"author":18,"featured_media":84887,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,5019,22,59],"class_list":{"0":"post-84870","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-mains-articles","9":"tag-new-cpi-series","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/84870","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=84870"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/84870\/revisions"}],"predecessor-version":[{"id":84874,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/84870\/revisions\/84874"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/84887"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=84870"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=84870"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=84870"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}