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January’s retail inflation with new base year likely between 2-3%

February 11, 2026 6 min read Economics GS3 (Indian Economy)
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What Happened

  • India's Ministry of Statistics and Programme Implementation (MoSPI) will release the first Consumer Price Index (CPI) data under the new base year of 2024 on February 12, 2026, replacing the 2012 base year series.
  • The headline retail inflation for January 2026 under the new series is expected to be between 2-3%, compared to the December 2025 figure of 1.33% under the old (2012 base) series. The December figure is expected to be revised upward in back series data.
  • The weight of food and beverages in the CPI basket has been sharply reduced from 45.86% to 36.75%, based on recommendations of an expert group constituted by MoSPI.
  • According to SBI Research, the new weights are expected to push overall CPI inflation marginally higher by 20-30 basis points on average, while reducing headline volatility during periods of elevated food prices.
  • The new series adopts the COICOP 2018 international classification framework and uses consumption data from the Household Consumption Expenditure Survey (HCES) 2023-24 to update item baskets and weights.

Static Topic Bridges

Consumer Price Index (CPI) — Methodology and Compilation

The Consumer Price Index (CPI) measures the average change in prices paid by consumers for a basket of goods and services over time. In India, the CPI (Combined) is compiled by the National Statistics Office (NSO) under MoSPI, released monthly, and serves as the official inflation measure for monetary policy. India has three CPI variants — CPI (Rural), CPI (Urban), and CPI (Combined) — compiled separately for All-India and each State/UT.

  • The previous CPI series (base year 2012=100) was released from January 2015 onward, replacing the 2010=100 series. Weights were drawn from the Consumer Expenditure Survey 2011-12 (NSS 68th Round) using Modified Mixed Reference Period (MMRP) data.
  • The new CPI series (base year 2024=100) comprises 358 items (up from 299), mapped to 12 divisions, 43 groups, 62 classes, and 192 sub-classes, aligned with the COICOP 2018 framework.
  • Prices are collected from 1,465 rural markets and 1,395 urban markets across 434 towns, with 12 online markets (cities with 25 lakh+ population) added for e-commerce price tracking.
  • Key additions to the basket include rural house rent (previously only urban), OTT platforms, international airfare, CNG, and PNG.

Connection to this news: The shift from 2012 to 2024 base represents the most significant overhaul of India's inflation measurement in over a decade. The lower food weight (36.75% vs 45.86%) means food price spikes will have a reduced impact on headline inflation, while the expanded basket better reflects contemporary consumption patterns including digital services and modern energy sources.

CPI Weight Revision — Significance and Implications

CPI weights represent the share of consumer expenditure allocated to each category and determine how much each component influences headline inflation. Periodic revision is essential because consumption patterns change with rising incomes — households shift spending from food to services, transport, and housing.

  • Food & Beverages: weight reduced from 45.86% to 36.75% (down ~9 percentage points)
  • Housing, Water, Electricity, Gas & Other Fuels: increased from 16.91% to 17.66%
  • Transport, Information & Communication: sharply increased from 8.59% to 12.41% (up ~3.8 percentage points)
  • Education Services: now carries a 3.33% weight as a standalone category
  • The new weights are derived from HCES 2023-24 data, reflecting actual household spending patterns post-pandemic

Connection to this news: The reduction in food weight is the most consequential change. Since food inflation in India is highly volatile (driven by weather, supply disruptions, and seasonal factors), a lower food weight means headline CPI will show less volatility. SBI Research estimates headline inflation could be 20-30 basis points lower during periods of elevated food inflation under the new weights.

Household Consumption Expenditure Survey (HCES) 2023-24

The HCES is conducted by the National Sample Survey Office (NSSO) under MoSPI and serves as the primary data source for determining CPI weights. The survey measures monthly per capita consumption expenditure (MPCE) across households, providing the expenditure shares used to assign weights to different consumption categories.

  • HCES 2023-24 was conducted from August 2023 to July 2024 covering the entire country
  • Sample: 2,61,953 households surveyed (1,54,357 rural + 1,07,596 urban) across 14,827 First Stage Units
  • Findings: Average MPCE was Rs. 4,122 (rural) and Rs. 6,996 (urban); the urban-rural gap declined to 70%
  • Rural households spent 47% of MPCE on food; urban households spent 40% — these proportions directly inform CPI weights
  • MoSPI conducted two consecutive rounds (2022-23 and 2023-24) after a gap since 2011-12 (the 2017-18 round data was junked by the government citing "data quality issues")

Connection to this news: The HCES 2023-24 provides the consumption basket and expenditure shares that form the foundation of the new CPI 2024 series. The declining share of food in household budgets directly mirrors HCES findings showing reduced food expenditure as incomes rise.

RBI Inflation Targeting Framework and Monetary Policy Committee (MPC)

India adopted a formal Flexible Inflation Targeting (FIT) framework in 2016 based on the recommendations of the Urjit Patel Committee (2014). The framework was institutionalised through the Finance Act, 2016, which amended the RBI Act, 1934 by inserting Sections 45ZA to 45ZN. Under Section 45ZA, the Central Government, in consultation with the RBI, sets the inflation target in terms of CPI once every five years.

  • Inflation target: 4% CPI inflation with tolerance band of +/-2% (i.e., 2% to 6%), notified for April 2021 to March 2026
  • MPC constituted under Section 45ZB: 6 members — 3 ex-officio (RBI Governor as Chairperson, Deputy Governor for monetary policy, one Executive Director) + 3 external members nominated by Central Government for 4-year terms
  • Failure provision (Section 45ZN): If average CPI inflation exceeds 6% or falls below 2% for three consecutive quarters, RBI must submit a report explaining reasons and remedial actions
  • The Urjit Patel Committee (2014) recommended using CPI (Combined) as the nominal anchor, replacing the earlier WPI-focused approach

Connection to this news: The CPI is the legally mandated measure for India's inflation targeting framework. The base year revision directly affects the numbers the MPC uses to set the repo rate. With January 2026 inflation expected between 2-3% under the new series — near the lower tolerance limit of 2% — the new methodology has direct implications for whether the Section 45ZN failure provision gets triggered.

Key Facts & Data

  • New CPI base year: 2024=100, replacing 2012=100; first release on February 12, 2026
  • December 2025 headline inflation (old series): 1.33%; January 2026 (new series): expected 2-3%
  • Food & Beverages weight: reduced from 45.86% to 36.75%
  • Transport, Information & Communication weight: increased from 8.59% to 12.41%
  • Items in CPI basket: increased from 299 to 358
  • Price collection markets: 1,465 rural + 1,395 urban across 434 towns + 12 online markets
  • HCES 2023-24 sample: 2,61,953 households across 14,827 FSUs
  • Average MPCE (HCES 2023-24): Rs. 4,122 (rural), Rs. 6,996 (urban)
  • RBI inflation target: 4% CPI with +/-2% tolerance band (valid April 2021 – March 2026)
  • MPC composition: 6 members (3 RBI ex-officio + 3 Government-nominated external)
  • SBI Research estimate: new weights push headline CPI up by 20-30 basis points on average