What Happened
- India's National Statistical Office (NSO) released a new Consumer Price Index (CPI) series with base year 2024=100, replacing the decade-old 2012 base, on February 12, 2026
- SBI Research analysis found that headline CPI under the new framework stood at approximately 2.75%, with core inflation estimated at around 3.38%
- The most significant change is the reduction in the weight of food and beverages from 45.86% to 36.75%
- Transport, information and communication weight increased sharply from 8.59% to 12.41%
- The basket expanded from 299 items to 358 items (308 goods, 50 services), capturing modern consumption patterns including OTT subscriptions and e-commerce
- SBI Research estimated the basket revision will impart an upward bias of approximately 0.2-0.4 percentage points to reported inflation
Static Topic Bridges
Consumer Price Index: Methodology and Base Year Revisions in India
The Consumer Price Index (CPI) measures changes in the price level of a weighted average basket of consumer goods and services. India's CPI series has undergone periodic base year revisions to reflect evolving consumption patterns. The NSO computes CPI for All India, and the Reserve Bank of India uses CPI-Combined as the official inflation target anchor under the Monetary Policy Framework Agreement.
- CPI base year revision history: 2001 to 2010 to 2012 to 2024
- Weighting diagrams are derived from Household Consumption Expenditure Surveys (HCES)
- Old series (2012 base): Weights from Consumer Expenditure Survey 2011-12 (68th Round NSS)
- New series (2024 base): Weights from HCES 2023-24, using Classification of Individual Consumption According to Purpose (COICOP 2018) international standard
- CPI is released monthly by NSO under the Ministry of Statistics and Programme Implementation (MoSPI)
- RBI's inflation target: 4% CPI with a tolerance band of +/-2% (2-6%)
Connection to this news: The shift from 2012 to 2024 base year is the first CPI revision in over a decade, and its alignment with the HCES 2023-24 data means the inflation measure now better reflects how Indian households actually spend their income in the 2020s.
Inflation Targeting Framework Under the RBI Act
India adopted a formal inflation targeting framework through the amendment to the RBI Act in 2016, following the recommendations of the Urjit Patel Committee (2014). The framework mandates the Reserve Bank of India to maintain CPI inflation at 4% with a tolerance band of 2-6%. The Monetary Policy Committee (MPC), a six-member statutory body, sets the policy repo rate to achieve this target.
- Inflation target set by the Government in consultation with RBI under Section 45ZA of the RBI Act, 1934
- Current target: 4% CPI-Combined, tolerance band 2-6% (renewed for 2021-2026)
- MPC composition: 3 RBI members (including Governor as chair) + 3 external members appointed by the Government
- If inflation exceeds 6% or falls below 2% for three consecutive quarters, RBI must submit a report to the Government
- CPI-Combined (not WPI) is the nominal anchor for monetary policy
Connection to this news: With headline CPI at 2.75% under the new basket, inflation is near the lower end of the tolerance band, which could influence MPC decisions on interest rates. The structural shift in CPI weights toward services may change how monetary policy transmission is assessed going forward.
Household Consumption Expenditure Survey (HCES) and Structural Economic Transformation
The Household Consumption Expenditure Survey, conducted by the NSO, provides critical data on spending patterns across Indian households. The HCES 2023-24 data that underpins the revised CPI basket reflects India's ongoing structural transformation from a goods-heavy to a services-oriented economy, consistent with rising per capita incomes and urbanization.
- HCES 2023-24: First reliable consumption survey released since 2011-12 (the 2017-18 survey was scrapped due to data quality concerns)
- Food expenditure share declining from 45.86% to 36.75% is consistent with Engel's Law (as income rises, the proportion of income spent on food falls)
- Services gaining weight: Transport and communication (8.59% to 12.41%), recreation and culture (more than doubled to 4.86%), housing (16.91% to 17.66%)
- New basket includes 358 items vs 299, adding items like OTT subscriptions, digital storage, and value-added dairy products
- Shift reflects India's rising per capita income and urbanization trends
Connection to this news: The falling food weight and rising services weight in the CPI basket is a statistical acknowledgment of India's structural economic transformation, where household spending is increasingly driven by services rather than essential food items.
Key Facts & Data
- New CPI base year: 2024=100 (replacing 2012=100), released February 12, 2026
- Headline CPI under new framework: ~2.75%; Core inflation: ~3.38%
- Food and beverages weight: Reduced from 45.86% to 36.75%
- Transport and communication weight: Increased from 8.59% to 12.41%
- Basket size: Expanded from 299 items to 358 items (308 goods, 50 services)
- Classification standard: COICOP 2018 (international standard for comparability)
- Data source for weights: Household Consumption Expenditure Survey (HCES) 2023-24
- Estimated upward inflation bias from revision: 0.2-0.4 percentage points
- RBI inflation target: 4% CPI-Combined with +/-2% tolerance band