On February 12, the Ministry of Statistics and Programme Implementation (MoSPI) announced the January retail inflation number — for the first time under the new 2024 base-year series. The new series shows January inflation at 2.75%, compared with 1.33% in December under the old series. The launch of the new Consumer Price Index (CPI) series, with a revised base year of 2024, is a long-overdue exercise to modernise India’s retail inflation measurement framework. The aim is to correctly reflect the structural shifts in the Indian economy, including urbanisation, digitalisation, and evolving consumption behaviour.
The rationale for revision
Internationally, the IMF recommends updating CPI weights and baskets at least every five years to ensure they remain representative. India's previous series, based on 2011–12 data, had become increasingly detached from contemporary realities. The new 2024 series is anchored in the Household Consumption Expenditure Survey (HCES) 2023–24, which captures how households across rural and urban India actually spend their money today.
To ensure a robust statistical foundation, MoSPI aligned the weight reference period (2023–24) closely with the price reference period (January to December 2024). This alignment minimises base-year bias and ensures that the prices used to calculate the index are synchronised with current consumption patterns.
Major changes
Adoption of a global classification system: One of the key changes is the full adoption of the United Nations' Classification of Individual Consumption According to Purpose (COICOP) 2018 framework. This replaces the older system of six broad groups with a more granular hierarchy consisting of 12 divisions, 43 groups, 92 classes, and 162 sub-classes. COICOP is a framework for grouping household consumption expenditures on goods and services into homogeneous categories based on the particular purpose those goods and services are considered to fulfil.
“This shift not only allows for deeper analytical insights but also ensures that India's inflation data is globally comparable,” says Dr Saurabh Garg, Secretary, MoSPI. While maintaining this international structure, an Expert Group formed by MoSPI introduced minor adaptations, such as renaming 37 sub-classes and nine classes to better reflect Indian terminologies and dietary traditions — for instance, separating milk and eggs, which are combined in the standard COICOP.
A new consumption basket: The basket of goods and services has been substantially overhauled to capture a wider array of modern spending. At the all-India level, the number of weighted items has increased from 299 to 358. The number of goods has risen from 259 to 308, while services have increased from 40 to 50, reflecting the growing importance of the services sector in household budgets. The new basket reflects current consumption patterns by removing obsolete items and including new ones.
For example, obsolete items such as VCR/VCD players, radios, and cassette tapes have been removed. In their place, the new series includes digital services such as online media streaming (OTT) and data-heavy telephone plans.
New-age items such as pen drives, external hard disks, and exercise equipment have also been included.
The services basket has been expanded as well. Household services now include attendants and babysitters. Rural house rent has been included for the first time, making the housing index more representative of the entire country.
Shift in weights: The results of HCES 2023-24 confirm a long-term trend in developing economies — as incomes rise, the proportion of expenditure on food declines. Consequently, the weight of Food and Beverages in the CPI basket has dropped from 45.86% in the 2012 series to 36.75% in the 2024 series. Weights for categories such as miscellaneous goods and services, health, and transport have risen. While food remains the largest single component, headline inflation will now be slightly less sensitive to food price shocks than before.
The weight of housing, water, electricity, gas and other fuels has increased from 16.89 to 17.67; transport has risen from 6.39 to 8.80; and health has edged up from 5.9 to 6.1. The weight of education services has declined from 3.51 to 3.33. A MoSPI note explains this change.
Changes in the weight of different categories reflect not only evolving consumption patterns but also reclassification under the new series. For example, under COICOP 2018, books and stationery are classified separately from education services. When education services are combined with books and stationery, the effective education share in CPI 2024 is 4.0%, compared with 4.46% in CPI 2012.
Similarly, if the CPI 2012 classification system were followed, the share of Food and Beverages would have declined from 45.86% to 40.10%. Under the CPI 2024 classification structure, the share of Food and Beverages — currently 36.75% in the 2024 series — would have been around 42.62% in the 2012 series.
A note by research firm QuantEco points out that under the 2024 CPI series, personal care, social protection and miscellaneous goods & services has been redefined as a broader category, with its weight rising to 5.0% from 3.9% under the previous series. “Despite the higher weight, inflation in this category moderated sharply to 19.0% in Jan-26, compared with 28.0% in Dec-25 (as per the old series). The change likely reflects, among other factors, a revision in the methodology of price collection for gold and silver jewellery products under the new series,” noted QuantEco.
Methodological changes
The 2024 series introduces methodological changes aimed at improving accuracy and reducing volatility. Instead of the Long Jevons method (which compared current prices back to the distant 2012 base), the new series uses a short-term, chain-based approach. It measures price changes month-on-month and links them over time. This approach handles missing items and product replacements (such as new smartphone models) more smoothly, without requiring complex retrospective quality adjustments.
To reduce field errors for items with static or regulated prices, MoSPI has shifted to centralised data collection for certain categories. For fuel, petrol, diesel, LPG, CNG, and PNG prices are now sourced directly from the Petroleum Planning and Analysis Cell (PPAC), covering nearly 90,000 retail outlets.
For regulated services like railways and postal services, rail fares, postal charges, and telecommunications tariffs are sourced directly from the relevant ministries and administrative bodies. For e-commerce, prices in 12 major towns (with populations above 25 lakh) now incorporate online markets to track e-commerce price volatility, while for OTT platforms, prices for services like Amazon Prime Video, Netflix, Jio Hotstar, SonyLiv, YouTube Premium, and Zee5 are collected online directly from the service providers’ websites.
The treatment of free items has also been clarified. In line with international standards, the Expert Group decided not to include items distributed free of cost in the CPI, as the index measures prices actually paid by households. If an item’s price becomes zero due to a government subsidy, it is excluded from the basket. The physical infrastructure of price collection has been strengthened to widen coverage across rural and urban markets. Rural market coverage has increased from 1,181 to 1,465 villages, while urban market coverage has expanded from 1,114 to 1,407 markets across 434 towns.
Data collection has transitioned from pen-and-paper methods to tablet-based Computer Assisted Personal Interviewing (CAPI), enabling real-time validation, geo-spatial tracking of shops, and faster data processing.
Transparency and dissemination
While MoSPI will not publish an official “core inflation” figure — citing the lack of a globally standardised definition — it will release more granular data than before. For the first time, item-level indices and inflation rates will be provided for every state and Union Territory. Separate rural, urban, and combined breakdowns will be available at the item level.
To maintain continuity, a linking factor has been provided for the All-India General Index, allowing users to connect the old and new series for long-term trend analysis. The linking factor is calculated to connect the two series over a common overlapping period. The overlapping period here is 2025, during which both CPI 2012 and CPI 2024 indices are available.
Experts’ take
ICRA economist Aditi Nayar says that the expected uptick (under the old series) in CPI inflation in FY2027 relative to FY2026 was largely anticipated to be driven by the Food & Beverages segment. However, with a lower weight for Food & Beverages in the new series, the expected base-effect-led uptick in the headline print in FY2027 is likely to be tempered.
According to Gaura Sen Gupta, Chief Economist, IDFC First Bank Economic Research, the weight of core items in the new base-year series has increased to 51% from 44.9% in the old base-year series, while the weight of food and beverages has declined to 40.1% from 45.9%. “The combination of a higher weight for core inflation and more subdued core inflation momentum will result in headline CPI inflation being lower compared to the old base-year series,” she says.
Sen Gupta also noted that instead of directly incorporating gold and silver prices, the new series reflects prices of jewellery made from these metals. “This will capture inflation better at the consumer level. As a result, personal care inflation, which captures gold and silver, recorded a more moderate inflation rate of 19% YoY under the new base year, compared with 28% under the old base year in December,” she said.
Though experts caution against reading too much into the new inflation numbers based on a single data release, they are relatively assured that the overhauled basket will reduce volatility going forward — potentially nudging the RBI to hold interest rates steady for longer.
