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Isolated surges, broader calm: Decoding the first month of India's CPI reset

February 17, 2026 5 min read Economics GS3 (Indian Economy)
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What Happened

  • India's Ministry of Statistics and Programme Implementation (MoSPI) released the first Consumer Price Index (CPI) data under the new base year 2024, replacing the earlier base year of 2012.
  • Retail inflation for January 2026 stood at 2.75% under the new series, with rural inflation at 2.73% and urban inflation at 2.77%.
  • Food inflation under the new series was recorded at 2.13% overall, with rural at 1.96% and urban at 2.44%.
  • The new CPI basket has expanded from 299 to 358 weighted items, and adopts the COICOP 2018 classification with 12 divisions instead of the earlier 6 groups.
  • The weight of food and beverages has been reduced from 45.86% to 36.75%, reflecting changing consumption patterns captured by the Household Consumption Expenditure Survey (HCES) 2023-24.

Static Topic Bridges

Consumer Price Index (CPI) — Methodology and Base Year Revision

The CPI measures the average change in prices paid by consumers for a representative basket of goods and services over time. In India, the CPI is compiled by the National Statistical Office (NSO) under MoSPI. The base year is revised periodically to reflect current consumption patterns — previous base years were 2001 (CPI-IW), 2010 (first all-India CPI), and 2012 (the series just replaced). The new CPI 2024 series uses expenditure weights derived from HCES 2023-24, which significantly reduces the gap between the weight reference year and the price reference year from six years (in the old series) to approximately six months.

  • CPI base year history: 2001 (CPI for Industrial Workers), 2010 (first unified CPI), 2012 (previous series), 2024 (current)
  • Compiled by: NSO, Ministry of Statistics and Programme Implementation (MoSPI)
  • Weight source: HCES 2023-24 data (replaces Consumer Expenditure Survey 2011-12, 68th Round NSS)
  • Items expanded: 299 to 358 (goods from 259 to 308; services from 40 to 50)
  • Hierarchy: 12 divisions, 43 groups, 92 classes, 162 subclasses, 358 items

Connection to this news: The January 2026 print is the first under the new series. The lower food weight (36.75% vs 45.86%) means food price spikes will have a smaller mechanical impact on headline inflation, while services, housing, and transport gain greater weight — reflecting India's structural shift toward a services-driven economy.

COICOP 2018 Classification Framework

The Classification of Individual Consumption According to Purpose (COICOP) is an international reference classification published by the United Nations Statistics Division. The 2018 revision (COICOP 2018) provides a standardised framework for classifying household consumption expenditure, used globally by national statistical offices. India's adoption of COICOP 2018 for the new CPI series replaces the earlier ad-hoc 6-group classification with 12 internationally comparable divisions.

  • COICOP 2018: Published by the UN Statistics Division; adopted by EU, OECD, and now India
  • 12 divisions include: Food and non-alcoholic beverages; Alcoholic beverages and tobacco; Clothing and footwear; Housing, water, electricity, gas; Furnishings and household equipment; Health; Transport; Communication; Recreation and culture; Education; Restaurants and hotels; Miscellaneous goods and services
  • Enables granular dissemination and cross-country comparison of inflation data
  • New items added: Rural housing, OTT/streaming services, modern consumer goods

Connection to this news: The shift from 6 groups to 12 COICOP divisions means India's CPI is now internationally comparable and captures modern consumption patterns such as digital subscriptions and health services more accurately. This is significant for both inflation targeting and academic comparison.

Inflation Targeting Framework — RBI Act Section 45ZA

India adopted a flexible inflation targeting (FIT) framework in 2016, based on recommendations of the Urjit Patel Committee (2014). Under Section 45ZA of the amended RBI Act, 1934, the Central Government, in consultation with the RBI, sets an inflation target every five years. The current target is CPI inflation of 4% with an upper tolerance band of 6% and a lower band of 2%. The six-member Monetary Policy Committee (MPC), constituted under Section 45ZB, is the decision-making body for the policy repo rate.

  • Legal basis: RBI Act, 1934 — Sections 45ZA (inflation target), 45ZB (MPC constitution), 45ZC (MPC functions)
  • Urjit Patel Committee (2014): Recommended CPI as the nominal anchor; adopted via Finance Act 2016
  • MPC composition: 3 RBI members (Governor as Chair, Deputy Governor for monetary policy, one RBI nominee) + 3 external members nominated by Central Government
  • Target: 4% CPI inflation (+/- 2%), reviewed every 5 years
  • CPI (Combined) is the nominal anchor — the base year revision directly affects the anchor's measurement

Connection to this news: The RBI's inflation targeting uses CPI as its sole nominal anchor. A rebased CPI with lower food weight and broader basket means the MPC's policy decisions will now respond to a different composition of price pressures. The January 2026 reading of 2.75% is well below the 4% target, which may influence future rate decisions.

Household Consumption Expenditure Survey (HCES) 2023-24

The HCES is conducted by the NSO to estimate household consumption patterns across India. The 2023-24 survey is the first successful large-scale consumption survey since the 68th Round (2011-12) — the 2017-18 survey results were junked by the government. HCES data provides the expenditure weights for the CPI basket and is also used for poverty estimation and GDP rebasing.

  • HCES 2023-24: Conducted by NSO under MoSPI; replaced 2011-12 CES (68th Round NSS)
  • The 2017-18 CES was withheld due to data quality concerns
  • Uses Modified Mixed Reference Period (MMRP) methodology
  • Key finding: Food share of household spending declined significantly, reflecting rising incomes and urbanisation
  • Also used for: GDP base year revision (to 2022-23), IIP revision, poverty line estimation

Connection to this news: The HCES 2023-24 data underpins the entire CPI rebasing. The reduction in food weight from 45.86% to 36.75% directly reflects HCES findings that Indian households now spend a smaller share of income on food and more on services, housing, health, and transport.

Key Facts & Data

  • CPI January 2026 (new series, base 2024): 2.75% (all-India), rural 2.73%, urban 2.77%
  • Food inflation January 2026: 2.13% (all-India), rural 1.96%, urban 2.44%
  • Food and beverages weight: 36.75% (new) vs 45.86% (old)
  • CPI basket: 358 items (new) vs 299 items (old)
  • Classification: COICOP 2018 with 12 divisions (new) vs 6 groups (old)
  • Weight reference: HCES 2023-24 (new) vs CES 2011-12 (old)
  • RBI inflation target: 4% CPI (+/- 2%) under Section 45ZA, RBI Act 1934
  • MPC constituted: September 29, 2016 under Section 45ZB