What Happened
- State Bank of India (SBI) researchers published a critique of India's newly released Consumer Price Index (CPI) series with base year 2024=100, flagging a geographic concentration in the newly added markets.
- According to SBI's analysis, Uttar Pradesh and Maharashtra together account for approximately 43% of the new markets added to the CPI basket, raising concerns about the representativeness of the data.
- The new CPI series was released by MoSPI on February 12, 2026, with January 2026 as the first reading under the new base year — recording inflation at 2.75%.
- SBI's critique argues that the concentration of new markets in a few large states may skew the inflation reading away from the national average, particularly in regions with different price structures.
- The MoSPI released a companion Frequently Asked Questions (FAQs) document explaining the methodology of the new CPI 2024 series.
Static Topic Bridges
Consumer Price Index (CPI): Compilation and Methodology
The Consumer Price Index (CPI) measures changes in the price of a basket of goods and services representative of household consumption. In India, MoSPI compiles two CPI series: CPI (Urban), CPI (Rural), and the combined CPI — the latter is the headline inflation measure used by the RBI for the flexible inflation targeting framework. The index is released monthly, with data collected from markets across India — the choice of markets, commodities, and their weights are critical determinants of what the index actually measures.
- Compiled by: National Statistical Office (NSO) under MoSPI
- Types: CPI (Urban), CPI (Rural), CPI (Combined) — headline measure
- Frequency: Monthly; provisional data released in the second week of the following month
- Previous base year: 2012=100 (adopted in 2015, replacing 1982 and 2010 series for different sub-indices)
- New base year: 2024=100 (first released February 2026)
- Weights source (new series): Household Consumption Expenditure Survey (HCES) 2023-24
- Weight of food and beverages: Reduced from 45.86% (2012 series) to 36.75% (2024 series) — reflecting improved living standards
Connection to this news: SBI's critique is methodologically important — if the markets sampled for price collection are geographically concentrated in high-population states, the resulting CPI may not accurately represent inflation in other regions, particularly smaller states with different consumption patterns.
Classification Framework and Market Selection in CPI
The new CPI 2024 series adopts the Classification of Individual Consumption According to Purpose (COICOP 2018), developed by the UN Statistics Division. This replaces the older six-group structure with 12 divisions at the first level, 43 groups, 92 classes, 162 subclasses, and 358 items at the last level — significantly more granular. The selection of markets (retail outlets and markets surveyed for price collection) is a separate operational decision and is at the heart of the SBI critique.
- New classification: COICOP 2018 (UN system) — 12 divisions, 358 items
- Old classification: 6 broad groups (Food, Pan/Tobacco, Fuel, Housing, Clothing, Miscellaneous)
- Number of commodities tracked: 358 items (up from 299 in the 2012 series)
- Markets surveyed: Urban markets (selected outlets in urban centres) and rural markets (village-level shops)
- Geographic distribution: The allegation is that newly added urban markets are concentrated in UP and Maharashtra (~43% of additions)
- Base period prices: Collected January–December 2024
Connection to this news: The COICOP 2018 upgrade improves the commodity classification framework, but the quality of inflation measurement also depends critically on geographic representativeness of price collection — the SBI critique targets this operational aspect.
Representativeness, Index Design, and Policy Implications
The accuracy and credibility of the CPI matters enormously because it directly determines: (a) whether the RBI's 4% inflation target is being met; (b) dearness allowance revisions for government employees and pensioners; (c) indexation of wages and welfare transfers. If the index is biased toward states with lower or higher inflation, it distorts monetary policy signals and wage adjustment norms. This concern is not new — the 2012 base year series itself faced scrutiny for over-representing urban consumption patterns relative to the predominantly rural Indian population.
- Policy uses of CPI: RBI inflation targeting anchor (Section 45ZA, RBI Act); DA computation for government employees; MGNREGS wage indexation; informal sector wage benchmarks
- The 2012 CPI series gave food a weight of 45.86% — reflecting India's relatively lower incomes at the time
- The 2024 series reduces food weight to 36.75%, reflecting HCES 2023-24 data showing increased spending on services, education, and health
- RBI's inflation projection (February 2026): FY26 CPI at 2.1% (under the new series); first reading was 2.75% for January 2026
- A geographically skewed market selection could lead to systematic under- or over-estimation of national inflation
Connection to this news: The SBI analysis highlights a potential methodological weakness in the transition to the new CPI series — one that policymakers and the MPC must be aware of when interpreting the initially low inflation readings under the new base year.
Key Facts & Data
- New CPI base year: 2024=100 (first released February 12, 2026)
- Previous base year: 2012=100
- January 2026 CPI inflation (new series): 2.75% (provisional)
- Food and beverages weight: 45.86% (2012 series) → 36.75% (2024 series)
- Weights source: HCES 2023-24
- Classification: COICOP 2018 — 12 divisions, 43 groups, 92 classes, 358 items
- SBI finding: UP + Maharashtra = ~43% of newly added markets
- Compiled by: MoSPI (NSO division)
- Policy use: RBI inflation target anchor under RBI Act Sections 45ZA-ZL (Finance Act 2016)
- DA and wage indexation: Also based on CPI (All India)