India to Revise CPI Basket and Base Year to Improve Inflation Accuracy and Reflect Modern Consumption.
Economy Business
The Government of India, via MoSPI, has decided to update the Consumer Price Index (CPI) by revising its base year to 2024 and refreshing market coverage, aiming for more precise inflation tracking from 2026 onward.
- MoSPI (Ministry of Statistics & Programme Implementation) proposes updating the CPI base from 2012 to 2024, using the latest Household Consumption Expenditure Survey (HCES 2022–23). This will refresh weightings based on current spending, covering ~2,900 markets—a marked increase from ~2,300 earlier.
- Current CPI misses key modern consumption trends—notably e-commerce, digital subscriptions, and ride-hailing usage. The revision also revisits the treatment of PDS (Public Distribution System) goods and other non-monetary transactions, aligning with IMF guidance for cleaner economic measurement.
- A high-level committee led by Biswanath Goldar (NSO) is overseeing the process. The new base year is expected to roll out between 2026–27, after validating data and ensuring continuity of the current series. CPI will align with new base years for GDP and IIP.
Main Point :- (i) RBI uses CPI as its primary inflation benchmark—with a target range of 4 ± 2%. Enhanced accuracy will better inform monetary policy, subsidy design, and indexing of pensions and salaries, leading to improved welfare targeting.
(ii) Moving base years every 5–7 years is best international practice. Updated indices better reflect emerging consumption patterns—such as increased spending on digital services, healthcare, and education, vital for aligning inflation data with current lifestyles.
(iii) The HCES survey rounds for 2023–24 are underway to fine-tune item weights. MoSPI will consult stakeholders before finalizing, followed by a smooth migration strategy to ensure data continuity—minimizing disruptions in key economic indicators like real GDP, WPI, and CPI trends.
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