India's inflation measurement is gearing up for a significant overhaul, reflecting the evolving consumption patterns and economic realities of the nation. The current Consumer Price Index (CPI) series, with a base year of 2012, is set to be replaced by a new series using 2024 as the base year, with the updated CPI series scheduled for release on February 12, 2026. This revision aims to provide a more accurate and representative picture of inflation in India, addressing the limitations of the outdated CPI basket and weightage structure.
The decision to revise the CPI series comes after prolonged discussions within the statistics ministry. The last CPI data with the 2012 base year showed inflation averaging just 1.7% between April and December 2025, considerably lower than the previous year. However, this figure contrasts with the experiences of many households, highlighting the growing gap between official inflation data and the perceived cost of living. This divergence has underscored the need for a more relevant and reliable measure of inflation.
Several key changes are expected in the new CPI series. One significant decision is the exclusion of free food items, including those received through the Public Distribution System (PDS), from the CPI basket. This move aligns India's statistical practices with international norms, which generally avoid incorporating free goods and services into price indices. Officials argue that including free items could distort inflation data, as these items typically exhibit lower price changes. However, some economists believe that excluding free food items may provide an incomplete picture of inflation, potentially affecting economic assessments and policy responses.
Another notable inclusion in the new CPI series is the measurement of housing inflation in rural areas. Previously, housing was only considered as part of urban inflation due to the limited prevalence of rented homes in rural areas. However, recent consumption surveys have revealed increased spending on house rent in rural areas, driven by changing preferences and increased mobility for work and other reasons. The Household Consumption Expenditure Survey (HCES) 2022-23 showed that the average monthly per capita expenditure on housing in rural areas increased nearly five times, from ₹7 in 2011-12 to ₹30.
The revision of the CPI series is not merely a technical adjustment but a comprehensive overhaul encompassing revisions in methods, weights, item baskets, data sources, and computation techniques. Reserve Bank of India (RBI) Governor Sanjay Malhotra has emphasized that strengthening statistical systems through this revision will enable more calibrated policymaking and improve assessments of inflation and real economic momentum. He noted that updating the base year of the CPI will ensure that the index more accurately reflects current consumption patterns and household spending.
The Monetary Policy Committee (MPC) is expected to pause in February 2026 to assess the base revision in the CPI and GDP series. The new CPI series with base year 2024 will be released on February 12, 2026, followed by the new GDP series with base year 2022-23 on February 27, 2026. The revised Index of Industrial Production (IIP) series with base year 2023 is expected by the end of May 2026.
The revision of India's inflation basket represents a crucial step towards modernizing the country's statistical framework and ensuring that economic policies are based on accurate and relevant data. By capturing evolving consumption patterns and incorporating new parameters, the updated CPI series is expected to provide a more reliable measure of inflation, facilitating better-informed decision-making by policymakers and businesses alike.
