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India inflation, GDP data resets may have RBI holding rates in April

February 14, 2026 4 min read Economics GS3 (Economics Monetary Policy)
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What Happened

  • The RBI's next Monetary Policy Committee (MPC) meeting in April 2026 will be held against the backdrop of newly revised CPI and GDP data series.
  • The CPI base year has been updated from 2012 to 2024, with the first official reading under the new series showing January 2026 retail inflation at 2.75% (provisional).
  • The GDP base year has been revised to 2022-23 (from 2011-12), with new GDP data to be published on February 27, 2026.
  • Despite the massive data overhaul, economists believe the revised series is unlikely to fundamentally change the RBI's monetary policy calculus.
  • The MPC refrained from projecting inflation for FY27 in its February meeting due to the impending base year change.

Static Topic Bridges

Consumer Price Index -- Base Year Revision and Methodology

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services consumed by households. In India, the CPI is compiled by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI). The CPI basket weights are derived from the Household Consumer Expenditure Survey (HCES). The new CPI series (base year 2024) uses weights from HCES 2023-24, replacing the previous series (base year 2012) that used HCES 2011-12 weights.

  • New base year: 2024 (replacing 2012); rolled out on February 12, 2026
  • Food and beverages weight: reduced from 45.9% to 36.8%; food alone: 39.1% to 34.8%
  • Core inflation weight (excluding food and fuel): increased from 47.3% to approximately 58%
  • New items added: airfares, online subscriptions, e-commerce sales, rural housing costs, electricity prices
  • Items removed: video cassette recorders, radios, horse-cart fares
  • Previous base year revisions: 2001 to 2010, 2010 to 2012, now 2012 to 2024

Connection to this news: The lower food weight in the new CPI series means food price spikes will have a smaller impact on headline inflation, potentially lowering measured inflation and giving the RBI more room for rate cuts. However, the transition period creates uncertainty, prompting the MPC to withhold FY27 inflation projections.

RBI's Flexible Inflation Targeting (FIT) Framework

India adopted the Flexible Inflation Targeting framework in 2016, enshrined through an amendment to the RBI Act (Section 45ZA, inserted by Finance Act 2016). The MPC targets CPI inflation at 4%, with an upper tolerance band of 6% and a lower tolerance band of 2%. The framework was recommended by the Urjit Patel Committee (2014) and operationalised through a government-RBI Monetary Policy Framework Agreement. The MPC comprises 6 members -- 3 from RBI (Governor as Chair, Deputy Governor, one RBI officer) and 3 external members appointed by the government.

  • Inflation target: 4% CPI with +/- 2% band (2% to 6%); reviewed every 5 years
  • First target period: April 2016 - March 2021; renewed: April 2021 - March 2026
  • Failure clause: if inflation exceeds 6% or falls below 2% for 3 consecutive quarters, RBI must explain to government
  • MPC meetings: 6 per year (bi-monthly); decisions by majority vote; Governor has casting vote
  • Current repo rate: 6.25% (reduced by 25 bps in February 2026 from 6.5%)
  • Urjit Patel Committee (2014): recommended inflation targeting; CPI as nominal anchor

Connection to this news: With January 2026 CPI at 2.75% under the new series -- well below the 4% target and close to the lower band of 2% -- the data reset creates a new baseline that the MPC must calibrate against. The RBI may pause to assess whether the low inflation reading reflects genuine price stability or is an artefact of the new methodology.

GDP Base Year Revision -- Implications for Economic Assessment

India's GDP statistics are compiled by NSO using the production approach (GDP at constant prices) and the expenditure approach. The GDP base year revision to 2022-23 will update the sectoral composition to reflect structural changes in the economy. Previous base year revisions (2004-05 to 2011-12, implemented in January 2015) led to significant upward revisions in growth estimates, notably GDP growth for FY14 was revised from 4.7% to 6.9%, creating controversy.

  • New GDP base year: 2022-23 (replacing 2011-12); GDP data under new series: February 27, 2026
  • IIP (Index of Industrial Production) also rebased to 2022-23
  • Previous controversy: 2015 base year revision drew criticism from former Chief Economic Adviser Arvind Subramanian, who argued GDP was overestimated by 2.5 percentage points
  • GDP methodology: uses corporate affairs ministry (MCA21) database, formal sector indicators
  • India's GDP (2024-25 advance estimate): approximately Rs 324 lakh crore (approximately $3.9 trillion)

Connection to this news: A GDP base year revision to 2022-23 may show a larger economy due to updated consumption patterns from HCES 2023-24, potentially revising India's GDP-to-debt ratio, fiscal deficit percentages, and sectoral GDP shares -- all of which feed into monetary policy decisions.

Key Facts & Data

  • New CPI base year: 2024 (from 2012); rolled out February 12, 2026
  • January 2026 CPI inflation (new series): 2.75% (provisional)
  • Food weight in CPI: reduced from 45.9% to 36.8%
  • Core inflation weight: increased from 47.3% to approximately 58%
  • New GDP base year: 2022-23 (from 2011-12); data release: February 27, 2026
  • Inflation target: 4% (+/- 2%); current repo rate: 6.25%
  • Next MPC meeting: April 8, 2026