In News:

The Ministry of Statistics and Programme Implementation (MoSPI) released the first press note of the revised Consumer Price Index (CPI) series with base year 2024=100. The data reported retail inflation at 2.75% (Year-on-Year) for January 2026.

This marks the transition from the earlier base year 2012=100 to 2024=100, reflecting updated consumption patterns of households.

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the change in retail prices of a fixed basket of goods and services consumed by households over time.

• It is India’s headline retail inflation indicator.
• Inflation is expressed as the percentage change in CPI over the same month of the previous year (YoY).

Compiled and Published By

• Published by: Ministry of Statistics and Programme Implementation
• Through: National Statistical Office (NSO)
• Price collection: Field Operations Division of NSO

Base Year Revision

• New Base Year: 2024 = 100
• Earlier Base Year: 2012 = 100
• Weights Source: Household Consumption Expenditure Survey (HCES) 2023–24

Base year revision ensures that:

• The consumption basket reflects current spending patterns.
• Inflation measurement aligns with structural changes in the economy.

Methodology Used in CPI (Base 2024)

1. Jevons Index (Item Level)

• Used at the individual item level.
• Calculates the average of price relatives (ratio of current to base prices).
• Reduces distortion caused by extreme values.

2. Young / Modified Laspeyres Index (Group Level)

• Aggregates item-level indices using fixed expenditure weights.
• Higher-weight items (e.g., food, rent) influence CPI more than low-spending items.

3. Combined CPI (All-India)

• Calculated by combining:
  • Rural CPI
  • Urban CPI
• Weighted by their respective shares in total consumption.

Thus, if rural consumption share is higher, rural inflation has greater influence on the all-India CPI.

Key Features of CPI (Base 2024=100)

1. Expanded Classification (12 Groups Instead of 6)

Earlier CPI had 6 major groups. The new series follows an updated international classification system with 12 broader and clearer categories, including:

• Food & beverages
• Housing
• Health
• Education
• Transport
• Communication
• Recreation & culture
• Miscellaneous services

2. Expanded Basket of Items

• Earlier basket: 299 items
• New basket: 358 items

The revised basket better captures:

• Modern consumption habits
• Digital and service-based spending

3. Greater Focus on Services

With rising income levels, household expenditure on services has increased.

The new series includes:

• OTT subions
• Healthcare services
• Education fees
• Transport services
• Communication services

4. Inclusion of Online Prices

Given the growth of e-commerce: Prices from online platforms (e.g., air tickets, subions) are now incorporated.

5. Introduction of Rural House Rent

For the first time:

• Rural housing rent is included in CPI.
• This improves representation of rural housing consumption.

6. Official Administrative Price Data

For certain regulated items, official government data is used directly:

• Rail fares
• Postal charges
• Petrol & diesel
• LPG

This enhances accuracy and consistency.

7. Digital Price Collection

• Field officers now use tablets instead of paper schedules.
• Improves timeliness, data accuracy and monitoring.

8. Detailed Monthly Dissemination

CPI data is now available:

• All-India
• State-wise
• Rural and Urban separately

This strengthens regional inflation analysis.

Importance of CPI

• Monetary Policy Anchor
  • Retail inflation targeting framework is based on CPI.
  • Guides RBI’s monetary policy decisions.
• Indexation
  • Used for Dearness Allowance (DA) revision.
  • Impacts wage negotiations.
• Macroeconomic Assessment
  • Reflects purchasing power.
  • Indicates cost-of-living trends.