New CPI Series 2024: India's January Inflation at 2.75%

Introduction to the Revised Inflation Index

India has officially transitioned to a new series for its Consumer Price Index (CPI), updating the base year to 2024 from 2012. The National Statistics Office (NSO) released the first set of data under this revised framework, reporting a headline retail inflation of 2.75% for January 2026. This move is designed to provide a more accurate reflection of current household consumption patterns and is expected to significantly influence the country's monetary and fiscal policies. The Reserve Bank of India (RBI), which uses CPI as its primary gauge for inflation, had deferred its inflation projections pending the release of this new series.

The Rationale for a Base Year Update

The previous CPI series, with a base year of 2012, was in use for over a decade. During this period, the Indian economy underwent substantial structural shifts. Rising incomes, rapid urbanisation, and the widespread adoption of digital technologies have fundamentally altered how Indian households spend their money. The emergence of e-commerce, online subscriptions, and digital payments necessitated a revision of the inflation basket to maintain its relevance. The update is based on the findings of the latest Household Consumption Expenditure Survey (HCES) for 2023-24, ensuring the index accurately represents contemporary spending habits.

Key Structural Changes in the CPI 2024 Series

The new CPI series introduces several significant changes to modernise inflation measurement. The number of items in the consumption basket has been expanded from 299 to 358, comprising 308 goods and 50 services. This expansion includes modern consumption items such as OTT subscriptions, online media services, and cleaner fuels like CNG/PNG. For the first time, rural house rent has also been included, improving the index's comprehensiveness. Furthermore, the methodology for data collection has been digitized through the use of Computer Assisted Personal Interviewing (CAPI), which replaces paper-based surveys and allows for real-time monitoring.

Adoption of International Standards

A pivotal change in the new series is the adoption of the Classification of Individual Consumption According to Purpose (COICOP) 2018, a framework developed by the United Nations. This replaces the earlier six-group structure with a more granular 12-division classification. This alignment with international standards enhances the comparability of India's inflation data and allows for a more detailed analysis of price pressures across specific sectors, such as 'Information and Communication' and 'Recreation, Sports and Culture', which were previously bundled into broader categories.

A Shift in Consumption Weights

The recalibration of weights assigned to different consumption categories is one of the most impactful changes. The weight of 'Food and Beverages' has been reduced significantly from 45.86% in the 2012 series to 36.75% in the 2024 series. Conversely, the weight for 'Housing' has increased to 17.67%. This rebalancing reflects a structural shift in household expenditure away from basic necessities towards discretionary spending on services like health, education, and transport. Chief Economic Advisor V Anantha Nageswaran noted that this change is typical of an economy with rising incomes and living standards.

Implications for Monetary Policy

The revised CPI series is expected to have a profound impact on the formulation of monetary policy. With a lower weight for the historically volatile food category, headline inflation may become more stable. This could allow the RBI to focus more on core inflation trends when making decisions about interest rates. According to CEA Nageswaran, the improved data quality will provide a more reliable basis for assessing real incomes and purchasing power, thereby enhancing the calibration of policy measures. The January 2026 inflation print of 2.75% falls comfortably within the RBI's tolerance band of 2% to 6%.

Analyst Commentary and Market Outlook

Economists have largely viewed the new series as a positive development, though they do not expect it to trigger immediate policy changes. Aditi Nayar, Chief Economist at Icra, noted that the headline print was in line with expectations, considering the reduced weight of food and beverages. Most analysts, including those from Emkay Global Financial and Kotak Mahindra Bank, anticipate that the RBI will maintain its current stance and keep interest rates on hold for an extended period. The consensus is that the central bank will observe the inflation trend under the new series for a few months before considering any policy adjustments.

Ensuring Data Continuity

To facilitate historical analysis and maintain continuity, the Ministry of Statistics and Programme Implementation has released a back series linking the old and new indices. Using 2025 as the overlapping year, linking factors have been provided for rural (0.5222), urban (0.5320), and combined (0.5267) indices. This allows analysts and policymakers to compare inflation trends over time, despite the structural changes in the measurement methodology. The new series data is available from January 2025, with year-on-year comparisons becoming possible from January 2026.

Conclusion

The introduction of the CPI series with base year 2024 marks a significant step forward in modernising India's economic data infrastructure. By aligning the inflation basket with contemporary consumption patterns and adopting global best practices, the new index provides a more accurate and stable measure of price changes. This enhancement is crucial for effective policymaking by the RBI and the government. As the economy continues to evolve, this updated framework will serve as a more reliable indicator of India's macroeconomic health.