Consumer Price Index: CPI base year revised to 2024

The revision of the Consumer Price Index (CPI) is reflecting India’s Changing Consumption Patterns in modern times. Read here to learn more.

India has revised the Consumer Price Index (CPI) to better reflect current household consumption trends, evolving price structures, and the structural transformation of the Indian economy.

The revision is based on the findings of the Household Consumption Expenditure Survey (HCES) 2023-24, which provides updated data on rural and urban spending patterns.

This periodic base revision ensures that inflation measurement remains realistic, relevant, and statistically robust.

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) is a statistical measure that tracks the average change in prices of a basket of goods and services consumed by households over time.

• It is the most widely used indicator to measure inflation in an economy.
• In simple terms, CPI tells us how much the cost of living has increased or decreased compared to a base year.

How Does CPI Work?

CPI is calculated by:

1. Selecting a representative basket of goods and services consumed by households.
2. Assigning weights to each item based on its importance in household expenditure.
3. Tracking the price changes of these items over time.
4. Comparing current prices with prices in a base year.

The formula broadly used is:

CPI= (Cost of basket in current year/Cost of basket in base year) x 100

Who Releases CPI in India?

In India, CPI data is released monthly by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI).

Types of CPI in India

India publishes:

• CPI (Combined) – Used for inflation targeting by RBI
• CPI Rural
• CPI Urban

The Reserve Bank of India (RBI) uses CPI (Combined) as the main inflation indicator under the Flexible Inflation Targeting (FIT) framework.

Why Was CPI Revised?

Over time, consumption patterns change due to:

• Rising incomes
• Urbanisation
• Digitalisation of services
• Lifestyle changes
• Shifts from goods to services

If CPI baskets are not updated, inflation measurement may become distorted and fail to reflect real household spending.

The revision ensures:

• Accurate inflation measurement
• Better policy calibration by the RBI
• Improved targeting of welfare schemes

Basis of Revision: HCES 2023-24

The updated CPI weights are derived from the latest Household Consumption Expenditure Survey (HCES) 2023-24, which:

• Covers rural and urban households
• Captures changing spending priorities
• Reflects new consumption categories like digital services

This ensures that the CPI basket mirrors the current economic reality rather than outdated expenditure patterns.

Key Highlights of the Latest CPI Data

1. Inflation Rate (January 2026)

• Year-on-Year Inflation: 2.75% (Provisional)
• Rural Inflation: 2.73%
• Urban Inflation: 2.77%

The near convergence of rural and urban inflation indicates reduced divergence in consumption price pressures.

Changes in CPI Basket: Addition & Removal of Items

Newly Added Items

Reflecting modern consumption trends, the revised CPI basket includes:

• OTT subscriptions
• Rural house rent
• Value-added dairy products
• Pen drives
• Babysitting services
• Fitness equipment

These additions show:

• Rise of the digital economy
• Growth in the service sector spending
• Changing family structures
• Increased health and lifestyle awareness

Removed Items (Obsolete Goods)

The revision has removed items that are no longer widely used:

• VCR/DVD players
• Tape recorders

This reflects technological obsolescence and shifting entertainment patterns.

Significance of CPI Revision

1. Improved Monetary Policy Accuracy

The Reserve Bank of India (RBI) uses CPI inflation as the primary indicator for monetary policy decisions under the inflation-targeting framework (4% ± 2%). A realistic CPI ensures:

• Better interest rate decisions
• Improved inflation targeting
• Accurate assessment of price stability

2. Better Welfare Targeting

Government schemes such as:

• Dearness Allowance (DA)
• Social pensions
• Food subsidies

are often indexed to inflation. Updated CPI ensures fair compensation and benefits.

3. Reflection of Structural Economic Shift

• India’s economy has transitioned from Goods-heavy consumption to Service-oriented and digital consumption
• The inclusion of OTT and babysitting services highlights rising urbanisation and service sector expansion.

4. Capturing Rural Transformation

Inclusion of rural house rent and value-added dairy products shows:

• Monetisation of rural housing markets
• Commercialisation of agriculture and allied activities

Economic Implications

The relatively moderate inflation rate of 2.75% in January 2026 suggests:

• Contained price pressures
• Stable food and fuel dynamics
• Possible room for accommodative monetary policy

However, policymakers must remain vigilant regarding:

• Global commodity prices
• Supply chain disruptions
• Climate-induced food price volatility

Comparison CPI 2012 vs 2024

Conclusion

The revision of the Consumer Price Index based on HCES 2023-24 marks an important step toward statistical modernization.

By incorporating contemporary consumption patterns and removing obsolete items, the updated CPI strengthens the credibility of India’s inflation measurement framework.

As India’s economy evolves, periodic base revision of CPI remains essential to ensure that inflation metrics accurately capture ground realities and support evidence-based policymaking.

Frequently Asked Questions (FAQs)

Q. What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the average change in prices of goods and services consumed by households over time. It is the primary indicator used to measure retail inflation in India.

Q. How is CPI classified under the new system?

CPI 2024 follows COICOP 2018, which classifies data into:

• Divisions
• Groups
• Classes
• Subclasses

This ensures global comparability.

Q. Who releases CPI data in India?

The CPI is released by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI).

Q. Why is CPI important for the RBI?

Under the inflation-targeting framework:

• The Reserve Bank of India (RBI) targets 4% inflation ± 2%
• CPI is the official measure used for monetary policy decisions.