In News: The Ministry of Statistics and Programme Implementation (MoSPI) has released the new Consumer Price Index (CPI) series, revising the base year from 2011–12 to 2023–24. The revision also reduces the weight of food and beverages from ~46% to ~37%, reflecting India’s evolving consumption patterns.
What is CPI?
- The Consumer Price Index (CPI) is India’s headline measure of retail inflation.
- It is used as the anchor for monetary policy under the inflation targeting framework.
- CPI measures changes in the prices of a fixed basket of goods and services consumed by households.
Why a New CPI Series?
- The previous CPI series (2011–12 base) became outdated due to:
- Rising incomes
- Urbanisation
- Shifts toward services, housing, transport, and digital consumption
- Periodic base-year revision aligns CPI with current consumption behaviour, a standard international practice.
Methodology of the New CPI Series
- Base Year: 2023–24
- Data Source: Household Consumption Expenditure Survey (HCES) 2023–24
- Market Coverage:
- 1,465 rural markets, 1,395 urban markets across 434 towns
- 12 online markets in large cities
- Item Basket: Expanded from 299 items to 358 items
- House Rent Index (HRI):
- Coverage extended to rural areas
- Excludes employer-provided accommodation
- Includes e-commerce prices (airfares, OTT subscriptions, telecom plans)
Key Features of the New CPI
Feature
Old CPI (2011–12)
New CPI (2023–24)
Significance
Food & Beverages Weight
~46%
~37%
Reflects Engel’s Law: rising incomes → lower food share
Housing Weight
7%
17.66%
Captures rising expenditure on rent, utilities
Services
Limited
Transport, health, education, communication included
Captures structural shift to services
Digital Economy
Not included
OTT, telecom plans, online airfares included
Reflects modern consumption trends
Inflation Volatility
High sensitivity to food shocks
Lower sensitivity
Provides stable headline inflation for policy decisions
Significance
1Improved Inflation Measurement
oCaptures current consumption patterns and urban–rural differences.
oMakes inflation data more credible and relevant.
2Aid to Monetary Policy
oReduced food weight lowers noise from weather-driven supply shocks, assisting RBI’s rate-setting decisions.
3Reflects Structural Transformation
oSignals India’s transition from food-led to housing- and services-led consumption.
oHighlights growth in digital economy and service sectors.
IAS-2026 - OPTIONAL / GEOGRAPHY / PUBLIC ADMINISTRATION / SOCIOLOGY / ANTHROPOLOGY / ORIENTATION ON 03 & 04-10-2025 
