India’s Consumer Price Index (CPI) is finally getting a reset.
On Thursday, the statistics ministry will roll out a revised CPI series with a new 2024 base year, replacing the 2012 base year that has measured inflation prints for over a decade. The new series updates both the base year and methodology to reflect how Indian households actually spend today, using findings from the Household Consumption Expenditure Survey, 2023–24.
Mint examines some of the key changes, and why it matters:
How will inflation readings change under the new CPI?
At the heart of the CPI revamp is a recalibration of weights across spending categories. The most consequential shift is the reduced weight of food and beverages, which falls to 36.8% of the CPI basket from 45.9%. Within this, food alone drops from 39.1% to 34.8%.
The decline reflects both changing consumption patterns—as incomes rise, discretionary spending typically grows faster than food—and reclassification. Prepared meals, for instance, have been moved out of the food basket. The change matters because food prices are among the most volatile components of CPI, and a lower food weight can materially alter headline inflation prints.
At the same time, higher weights for services and miscellaneous items mean inflation in housing, transport, healthcare and personal services will now exert greater influence on the headline number.
Based on weights alone, economists estimate CPI inflation for January 2026 could be around 3%—roughly 50 to 80 basis points higher than what the old series might have shown. The eventual impact, however, will also depend on base-year price levels and the new indexation methodology.
How modern is the new CPI measurement?
The revised CPI marks a decisive shift towards capturing a more digital, services-led economy. For the first time, inflation measurement formally incorporates online prices. Airfares, OTT subscriptions, telecom plans and select services are now tracked directly through digital platforms.
To capture e-commerce pricing, 12 dedicated online markets have been added in large cities. For items with centralized or regulated pricing, such as fuel, rail fares, electricity, and telecom, data now comes directly from administrative sources, improving consistency.
On the ground, data collection has moved to tablet-based, geo-tagged systems with built-in, real-time validation and supervisory dashboards. Together, these upgrades reduce delays, improve data quality, and make inflation measurement more timely and transparent.
What’s new in the CPI 2024 series?
The CPI 2024 series also expands the scale and granularity of price collection. Rural coverage now spans 1,465 villages across 685 districts, up from 1,181 villages and 582 districts earlier. Urban coverage has increased to 1,395 markets in 434 towns, from 1,114 markets in 310 towns.
The consumption basket itself has widened, tracking 308 goods (up from 259) and 50 services (up from 40). These are organised into a far more detailed structure—12 divisions, 43 groups, 92 classes and 162 sub-classes—compared with just six groups and 23 sub-groups in the earlier series.
Importantly, the new CPI will also release item-level indices separately for rural and urban areas at the state level, enabling more granular analysis of price pressures.
What are the most significant structural changes?
One of the most significant structural upgrades is the adoption of the Classification of Individual Consumption According to Purpose (COICOP 2018), a UN-endorsed global standard for grouping household expenditure. This brings India’s inflation framework closer to international practice and improves cross-country comparability.
Since HCES 2023–24 was not originally mapped to COICOP, several items have been carefully reclassified. Clothing and footwear, which were not gender-differentiated in the survey, are now split into men’s, women’s and children’s categories using Census 2011 demographic data. Tuition fees have been broken down into primary, secondary and higher education segments based on enrolment data from UDISE and the All India Survey on Higher Education (AISHE) 2021–22.
What the new CPI finally fixes
The revised series addresses several long-standing methodological issues. A key improvement relates to the treatment of free items and missing prices. Under the old series, when Public Distribution System (PDS) items such as rice and wheat were made free under government schemes, their weights were redistributed to other items—artificially skewing inflation readings.
In the new CPI, free social transfers are excluded altogether, recognising them as government transfers rather than household consumption. Missing prices are now handled through a standardised imputation framework instead of weight redistribution, making month-on-month inflation prints more stable.
The basket has also been cleaned up to remove obsolete items such as VCRs, typewriters and cassette players, ensuring the index better reflects current household expenditure.
What concerns may go unaddressed?
Despite the improvements, concerns persist—most notably around housing inflation. While the housing index has been expanded to cover both rural and urban areas, and now excludes employer-provided accommodation, questions remain about whether it captures on-ground realities, particularly in large cities.
“On the 2012 base year series, housing inflation hovers near historical lows, which contradicts with anecdotal data of rising rents in metros and cities,” said Gaura Sen Gupta, chief economist at IDFC First Bank.
Another concern is the weight distribution. While housing’s overall weight has increased from around 9% to 12%, this includes the addition of rural housing, where rental inflation tends to be significantly lower, and could depress the consolidated housing inflation figure. Similarly, questions remain about how well the health component captures actual healthcare costs, though specific methodological changes in this area have not been publicly detailed.