The Ministry of Statistics and Programme Implementation (MoSPI) has announced a significant revision to India’s Consumer Price Index (CPI), shifting the base year from 2012 to 2024. This comprehensive overhaul, based on the Household Consumption Expenditure Survey (HCES) 2023–24, represents the most substantial update to India’s primary inflation measurement tool in over a decade, reflecting the dramatically transformed consumption patterns of Indian households in the post-pandemic era.
The revision carries profound implications for how India measures and understands inflation, with potential consequences for monetary policy, wage negotiations, welfare programs, and economic analysis. Most significantly, the weight of Food & Beverages—traditionally the largest component of the CPI basket—is being reduced from 45.86% to 36.75%, while Housing weight surges from 10.07% to 17.66%, potentially reshaping inflation dynamics and policy responses.
The revised CPI 2024 will comprise 358 items (up from 299), incorporate reclassified categories, expand price collection from 2,860 markets across 434 towns, include online market data for the first time, and adopt the internationally comparable Classification of Individual Consumption According to Purpose (COICOP) 2018 framework. The first CPI 2024 data is scheduled for release on February 12, 2026, with a linking factor ensuring continuity between the old CPI 2012 and new CPI 2024 series.
The Consumer Price Index measures the average change over time in the prices paid by consumers for a representative basket of goods and services. It is the primary measure of inflation in most economies and serves multiple critical functions:
Monetary Policy Anchor: Central banks, including the Reserve Bank of India (RBI), use CPI as a primary target for monetary policy, with inflation targets typically set at 4% (±2%) for CPI inflation.
Economic Analysis: Economists and researchers use CPI to understand inflation trends, real wage growth, purchasing power changes, and broader economic conditions.
Policy Calibration: Governments use CPI to calibrate fiscal policy, subsidies, and economic measures based on inflation conditions.
Wage and Contract Adjustments: Labor unions, employers, and governments use CPI to negotiate wage increases, adjust pensions, and update contract terms to reflect inflation.
Welfare Programs: Dearness allowances, pension adjustments, and welfare program parameters are often indexed to CPI inflation.
International Comparisons: CPI allows comparison of inflation across countries and time periods, facilitating international economic analysis and policy learning.
Base year updates are necessary because:
Consumption Pattern Evolution: Over time, how households spend money changes dramatically. A 2012 basket may not reflect how 2024 households actually spend.
Product and Service Changes: New products and services emerge (e-commerce, digital services, streaming) while others decline (traditional retail, landline phones).
Quality and Product Mix Changes: Quality improvements in existing products (smartphones, automobiles) change effective prices.
Structural Economic Changes: India’s economy transformed substantially between 2012 and 2024, with urbanization, rising incomes, and changing lifestyles.
Measurement Improvements: Statistically valid base years should be updated regularly (typically every 5-10 years) to maintain accurate inflation measurement.
Policy Relevance: An outdated CPI basket may misdirect policy by weighing factors no longer central to household consumption.
The revision is grounded in the Household Consumption Expenditure Survey (HCES) 2023-24, a comprehensive national survey of household consumption patterns conducted by the Ministry of Statistics and Programme Implementation. Key aspects include:
Frequency and Scope: The HCES is conducted periodically (typically every 5 years) to capture detailed information on household consumption across all states and union territories.
Sample Size and Representation: The survey covers a statistically representative sample of households across rural and urban areas, income levels, and regions.
Consumption Categories: The survey collects detailed data on household spending across food, beverages, clothing, housing, health, education, transport, entertainment, and other categories.
Temporal Context: The 2023-24 survey was conducted during a period when consumption patterns had stabilized following the COVID-19 pandemic, reflecting structural changes in how Indians spend money.
The HCES 2023-24 reveals significant shifts in Indian household consumption:
Declining Food Spend Share: Food and beverages, traditionally consuming nearly half of household budgets, now account for a smaller share, reflecting rising incomes and dietary diversification.
Rising Housing Costs: Housing expenses have grown substantially, reflecting urbanization, rising property values, and higher housing costs across India.
Education and Health: Increasing expenditure on education and healthcare reflects growing aspirations for quality education and improved health services.
Transport and Communication: Rising spending on transport and communication reflects increased mobility and digital connectivity.
Entertainment and Recreation: Growing entertainment spending reflects rising incomes and changing leisure preferences.
E-Commerce and Digital Services: Increasing consumption through online channels and digital services reflects India’s digital transformation.
These shifts reflect India’s economic development, rising per capita incomes, and transformation from a consumption pattern dominated by food to more diversified spending across housing, services, and digital products.
Previous Weight (CPI 2012): 45.86%
New Weight (CPI 2024): 36.75%
Significance: This reduction of approximately 9 percentage points represents the most dramatic shift in the revised CPI basket, reflecting fundamental changes in how Indian households spend their money.
Implications:
Inflation Dynamics: Food inflation, which has been volatile and high in recent years, will have reduced impact on overall CPI inflation. An inflation shock in food prices will now have proportionally less effect on measured inflation.
Monetary Policy: With food inflation carrying less weight, the RBI’s inflation target may be influenced less by food price shocks, potentially allowing more stable monetary policy responses.
Welfare Programs: Dearness allowances and welfare adjustments indexed to CPI will respond less to food price movements.
Real Impact on Households: Despite lower statistical weight, food spending remains crucially important to many Indian households, particularly lower-income groups. The reduced weight doesn’t change the fact that food inflation significantly impacts household purchasing power.
Structural Shift: The reduction reflects India’s progression toward higher-income status where food represents a smaller share of expenditure, consistent with Engel’s Law (as incomes rise, food’s share of expenditure declines).
Previous Weight (CPI 2012): 10.07%
New Weight (CPI 2024): 17.66%
Significance: Nearly doubling housing’s weight represents a dramatic upward revaluation of its importance in household budgets.
Reasons for Increase:
Rising Housing Costs: Real estate prices, rental costs, and property values have risen substantially across urban and rural India.
Urbanization: Increasing urbanization has made housing costs a larger share of household budgets, as urban housing is generally more expensive.
Improved Measurement: The revision introduces more sophisticated methods for measuring housing costs, including imputed rent for owner-occupied properties.
Quality Improvements: Rising standards for housing infrastructure and amenities increase effective housing costs.
Urban Focus: As India’s urban population grows and purchasing power increases, housing becomes a larger budget component.
Implications:
Housing Inflation Impact: Housing price and rental inflation will now have nearly doubled impact on overall CPI inflation, potentially making measured inflation more sensitive to housing market dynamics.
Monetary Policy Sensitivity: The RBI’s inflation target will now be more influenced by housing inflation, which has been rising in many urban areas.
Policy Attention: Housing inflation, particularly rental inflation, will receive greater policy attention and scrutiny.
Real Household Impact: The change acknowledges reality—housing is among the largest household expenses in modern India, particularly in urban areas.
Potential Inflation Push: If housing inflation remains elevated, the revised higher weight could result in higher measured inflation, potentially influencing monetary policy decisions.
Item Addition: The CPI basket expands from 299 items to 358 items, an increase of 59 items (approximately 20% expansion).
Reasons for Expansion:
New Products and Services: E-commerce products, digital services, streaming subscriptions, and other contemporary products are now included.
Category Reclassification: Some items are reclassified into more granular categories to capture price movements more precisely.
Regional Variations: Additional items capture regional consumption patterns and product preferences.
Quality Differentiation: Some items are now tracked at different quality levels to better capture price changes.
Implications:
More Detailed Price Tracking: The expanded basket provides more granular understanding of price movements across categories.
E-Commerce Integration: Inclusion of online market prices captures the rapidly growing e-commerce channel.
Better Category Coverage: More comprehensive coverage of contemporary consumption patterns.
Improved Accuracy: More items enable better representation of actual household consumption.
The revised CPI 2024 elevates Education from a subcategory to a standalone category, reflecting:
Rising Education Spending: Household expenditure on education has grown substantially as aspirations for quality education increase.
Policy Importance: Education inflation becomes separately trackable, enabling targeted policy responses.
International Comparability: Education as a standalone category aligns with international CPI standards.
Recognition of Importance: Acknowledges education as a primary household expense and development priority.
Rural Markets: Price data collected from 1,465 rural markets (expanded coverage of rural areas)
Urban Markets: Price data collected from 1,395 urban markets across 434 towns
Total Market Coverage: 2,860 markets across 434 towns represent comprehensive geographic coverage
Online Markets Addition: 12 online markets in cities with population over 2.5 million will be added to capture e-commerce prices on a weekly basis
Significance:
E-Commerce Representation: For the first time, online market prices are systematically included, reflecting India’s growing e-commerce sector.
Real-Time Data: Weekly price collection from online markets captures current e-commerce prices.
Urban Expansion: Expanded urban market coverage captures urbanization and growing urban consumption.
Online Inflation Tracking: Enables understanding of price movements on online platforms, which often differ from offline prices.
Digital Economy Recognition: Explicitly incorporates India’s growing digital economy into inflation measurement.
COICOP stands for Classification of Individual Consumption According to Purpose, an international classification system developed by the United Nations Statistical Commission. COICOP 2018 is the latest version.
Purpose: Provides a standardized framework for classifying household consumption across different categories and subcategories.
International Standard: Adopted by most countries for consistency and international comparability.
Hierarchical Structure: Organizes consumption from broad categories down to detailed subcategories.
International Comparability: Using COICOP 2018 enables direct comparison of India’s CPI with other countries using the same framework.
Statistical Consistency: Alignment with international standards improves data quality and analytical rigor.
Research Facilitation: Researchers can compare inflation across countries using consistent categorization.
Policy Learning: Enables policy learning and comparison with international peers.
Future Updates: Adoption of international frameworks facilitates future updates as new versions are released.
The COICOP 2018 adoption includes several improved categorizations:
Food and Non-Alcoholic Beverages: More detailed breakdown of food categories with clearer subcategories.
Alcoholic Beverages and Tobacco: Separate categorization reflecting regulatory and consumption differences.
Clothing and Footwear: Detailed tracking of apparel and footwear categories.
Housing, Water, Electricity, Gas, and Other Fuels: Comprehensive housing cost measurement including imputed rent.
Furnishings, Household Equipment, and Routine Household Maintenance: Detailed household goods and services.
Health: Expanded health category capturing rising health expenditure.
Transport: Detailed transport tracking including public and private transport.
Communication: Separate communication category reflecting digital connectivity importance.
Recreation and Culture: Entertainment and cultural consumption tracking.
Education: Standalone education category reflecting spending importance.
Restaurants and Accommodation Services: Food service and hospitality.
Miscellaneous Goods and Services: Other consumption categories.
Housing measurement has historically been challenging because:
Owner-Occupied Properties: Many households own homes but don’t pay rent, making housing cost measurement complex.
Rent Imputation: Traditional approach is to impute rent for owner-occupied properties based on market rents.
Rising Rent Variation: Rents vary significantly by location, property size, and quality.
Data Collection Difficulty: Obtaining consistent rent data across diverse housing types is challenging.
The CPI 2024 introduces improved housing measurement methods:
Imputed Rent Calculation: More sophisticated calculation of imputed rent for owner-occupied properties based on recent market data.
Stratified Sampling: Rental data stratified by location, property type, and size for better representation.
Quality Adjustment: Methods to account for housing quality improvements and variations.
Regular Updates: More frequent updates to rental indices reflecting current market conditions.
Urban Focus: Enhanced measurement in urban areas where housing costs are highest and most volatile.
The improved measurement methods will:
Potentially Increase Housing Inflation: More accurate measurement may reveal higher housing inflation than previously captured.
Influence Overall CPI: With housing weight increased to 17.66%, improved housing measurement could push overall CPI inflation upward.
Affect Monetary Policy: Higher measured housing inflation could influence RBI’s monetary policy stance.
Reflect Reality: More accurately reflects actual housing costs that households face.
When base years change, a statistical challenge arises: how to compare historical inflation between the old and new series. To address this:
Linking Factor: MoSPI will release a linking factor between CPI 2012 and CPI 2024 for all-India, rural, and urban indices.
Statistical Tool: The linking factor enables conversion between the old CPI 2012 and new CPI 2024 series, maintaining continuity.
Historical Comparison: Analysts can compare inflation across the 2012 and 2024 base years using the linking factor.
Policy Continuity: Ensures that inflation-indexed policies can transition from CPI 2012 to CPI 2024 smoothly.
Data Consistency: Allows reconstruction of historical inflation series using both old and new methodologies.
First CPI 2024 Release: February 12, 2026
Linking Factor Release: Concurrent with first CPI 2024 data to enable immediate comparability
Gradual Transition: Markets and policymakers will gradually shift to using CPI 2024 while maintaining historical CPI 2012 data for reference
Parallel Series: Initially, both CPI 2012 and CPI 2024 will be published to enable transition analysis
Inflation Target Context: The RBI maintains an inflation target of 4% (±2%) for CPI inflation. The revised CPI 2024 will affect how inflation is measured against this target.
Housing Inflation Sensitivity: With housing weight nearly doubled, the RBI’s inflation target will be more sensitive to housing price dynamics.
Food Inflation Buffering: Reduced food weight means food inflation shocks will have less impact on measured inflation, potentially smoothing RBI’s policy responses.
Policy Recalibration: The RBI may need to recalibrate its understanding of inflation dynamics under the new CPI 2024 framework.
Transition Period Challenges: The transition period between CPI 2012 and CPI 2024 may create challenges in policy implementation as inflation metrics change.
Dearness Allowance Indexation: Government employee dearness allowances indexed to CPI will change as CPI 2024 is adopted.
Pension Adjustments: Pensioner benefits and adjustments indexed to CPI will reflect new weights.
Subsidy Programs: Food and energy subsidies justified based on inflation may shift as inflation measurement changes.
Fiscal Impact: Government budgets indexed to CPI inflation will be affected by revised CPI 2024.
Wage Negotiations: Public sector wage negotiations will reference the new CPI 2024 series.
Wage Indexation: Wage agreements often include CPI-indexed increases. The new CPI 2024 will affect wage calculations.
Real Wages: Workers’ real wage gains (wages minus inflation) will be calculated differently under CPI 2024.
Collective Bargaining: Labor unions will reference CPI 2024 in wage negotiations.
Cost of Living Adjustments: COLA (Cost of Living Adjustment) clauses in contracts will be affected.
Bond Yields: Inflation-linked securities yield will reflect CPI 2024 expectations.
Real Returns: Investors will recalculate real returns on investments based on CPI 2024 inflation.
Inflation Expectations: Market participants will form new inflation expectations under CPI 2024.
Asset Allocation: Changes in inflation measurement may influence investment decisions and asset allocation.
Input Cost Planning: Businesses will adjust input cost expectations and pricing strategies based on CPI 2024.
Supply Chain Economics: CPI 2024 will inform supply chain strategy and supplier negotiations.
Pricing Power: Understanding inflation drivers (reduced food weight, increased housing weight) will inform pricing strategies.
Contract Terms: Long-term contracts will need to reflect new inflation measurements.
Critique: Some analysts argue that the dramatic increase in housing weight could push measured inflation higher, potentially constraining monetary policy and growth.
Imputed Rent Challenges: Measuring imputed rent for owner-occupied homes remains methodologically challenging and may not reflect actual household costs.
Urban Bias: The increased housing weight may reflect urban consumption patterns more than rural patterns.
Wage Lag: For workers whose wages don’t keep pace with housing inflation, the higher weight may overstate inflation’s real impact.
Critique: Lower-income households spend much larger shares on food, so reducing food weight may understate inflation’s impact on vulnerable populations.
Inequality Dimension: Different income groups face very different inflation rates due to different consumption patterns; one aggregate CPI may not serve all populations equally well.
Agricultural Economy: For rural and agricultural populations, reduced food weight may understate inflation’s importance.
Measurement of Real Impact: While food weight is reduced statistically, food inflation remains crucially important to millions of households.
Data Quality: E-commerce prices may not be fully comparable to offline prices due to differences in product quality, bundling, and dynamic pricing.
Price Volatility: Online prices change more rapidly and frequently than offline prices, complicating price collection.
Spatial Coverage: Only 12 online markets in cities over 2.5 million population may not adequately represent e-commerce across India.
Sampling Issues: Representative sampling from millions of online products is methodologically challenging.
Quality Adjustment: How to account for quality improvements in products remains partially subjective and challenging.
Substitution Effects: The fixed basket approach may not capture consumer substitution toward cheaper alternatives during inflation.
New Products: Including new products at different stages of price decline can distort inflation measurement.
Data Comparability: Comparing inflation across CPI 2012 and CPI 2024 may be complicated by linking factors that imperfectly capture differences.
Policy Continuity: Policies indexed to CPI 2012 may need renegotiation when transitioning to CPI 2024.
Market Confusion: Financial markets may experience volatility during the transition as participants adjust to new inflation measurements.
Global Standard: COICOP is used by most countries, enabling direct inflation comparison.
Methodological Rigor: COICOP provides international best practices in consumption classification.
Future Proofing: International standards facilitate future updates and revisions.
Research Collaboration: Researchers globally can compare inflation using consistent frameworks.
Earlier Adoption: India adopts COICOP 2018 ahead of some global peers, advancing statistical modernization.
Data Quality: Alignment with international standards signals commitment to data quality and rigor.
Global Integration: Supports India’s integration into global economic governance and policy coordination.
Best Practices: Demonstrates commitment to international best practices in statistical measurement.
HCES 2023-24 Completion: Survey completed and data analyzed to determine new weights and categories
Announcement: MoSPI announces CPI 2024 revision with new base year
Price Data Collection: Preparation for collecting prices from expanded network of 2,860 markets
Online Market Integration: Setup of price collection from 12 online markets in major cities
First Release: February 12, 2026 – First CPI 2024 data released
Linking Factor: Concurrent linking factor enabling comparison with CPI 2012
Transition Period: Gradual transition with both CPI 2012 and CPI 2024 published
Full Adoption: CPI 2024 becomes primary inflation measure for policy and analysis
Data Quality Assurance: Ensuring price data from 2,860 markets meets quality standards
Training: Training enumerators and data collectors for new categories and methodology
Technology: Implementing systems for real-time e-commerce price collection
Market Coordination: Coordinating with markets and online retailers for price data collection
Quality Control: Establishing quality assurance mechanisms for new data collection processes
Base Year Shift: From CPI 2004-05 to 2012 (approximately 7-year cycle)
Key Changes: Expanded basket, new weighting based on HCES 2009-10
Items Added: Increased from approximately 260 to 299 items
Categories Modified: Revised category structure and item classifications
Impact: Significantly shaped inflation measurement for India through 2025
CPI base year revisions occur roughly every 5-10 years as:
Food vs. Housing Trade-off: Future inflation narratives will shift from food-focused to housing-inclusive, changing policy discussions.
Urban Inflation Emphasis: Rising housing weight emphasizes urban consumption patterns in inflation measurement.
Services Inflation: Increased weight on services (education, health, housing) elevates services inflation importance.
Digital Economy Recognition: First-time inclusion of e-commerce prices recognizes digital transformation’s role in pricing dynamics.
Monetary Policy: RBI will need to adjust its inflation analysis frameworks and possibly policy response functions under CPI 2024.
Fiscal Policy: Government subsidy programs and spending indexed to inflation will need recalibration.
Social Policy: Welfare programs indexed to inflation will operate under new frameworks.
Research Agenda: Academic and policy research will need to adapt to new inflation measurement framework.
The CPI 2024 revision represents more than a technical update—it reflects India’s economic transformation and modernization. The shift from food-dominated consumption to diversified spending including services, housing, and digital goods reflects India’s development progression and rising living standards.
As India continues to develop and consume patterns continue to evolve, regular CPI updates will be essential to maintaining measurement accuracy and policy relevance. The CPI 2024 ensures that India’s primary inflation measure accurately reflects contemporary consumption patterns and supports evidence-based policymaking.
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