CPI — Going forward, the base year will be revised every five years to keep pace with economic shifts

The statistics ministry on Thursday unveiled a new Consumer Price Index (CPI) series, updating the base year to 2024 from 2012. The revision resets the benchmark for measuring prices to better assess inflation. The CPI is the Reserve Bank of India‘s primary inflation gauge and plays a central role in monetary policy and interest rate decisions. Anoushka Sawhney explains:

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What is CPI and why is the base year revised?
The CPI measures changes in prices of goods and services consumed by households, serving as a key indicator of cost-of-living inflation. The base year is the reference point against which price changes are measured, with its index fixed at 100.
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As household consumption patterns evolve, the base year is periodically updated to ensure the index remains representative. The new series adopts 2024 as the base year, drawing item weights from the Household Consumption Expenditure Survey (HCES) 2023-24.

The revised weights reflect changing consumption patterns. The share of food and beverages has declined to 36.75% from 45.86% earlier, while weights of transport and communication, housing and utilities, and personal care have increased.

What has changed?
The CPI basket has been expanded to 358 items (308 goods and 50 services), up from 299 earlier. These are organised across 12 divisions, 43 groups and 92 classes. Price collection has also widened, now covering 1,465 rural markets (up from 1,181) and 1,395 urban markets (up from 1,114). Newly added items include AirPods, hand sanitisers, OTT subscriptions, air purifiers, ecommerce purchases, and international airfares. Outdated items such as library charges, radio and horse-cart fares have been removed. Despite the overhaul, about 98% of the basket remains comparable with the previous series.
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The government has also released more granular data, including state-wise and sector-wise indices across all classification levels.

What is new in the latest series?
For the first time, prices from 12 online markets in cities with populations above 2.5 million have been included to better capture ecommerce trends. Items supplied free under government schemes – such as foodgrains distributed through the Public Distribution System – have been excluded, as the CPI measures household expenditure rather than consumption per se.

Several service prices will now be sourced directly from official or digital platforms: airfares (from airline websites), OTT subscription rates (provider platforms), telecom tariffs (operators), postal charges (India Post), and fuel prices (ministry database).

What next?
Going forward, the base year will be revised every five years to keep pace with economic shifts, while the Household Consumption Expenditure Survey will be conducted every three years.

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