India to Lower Food Weight in CPI Basket Under New Inflation Series

India is set to revise the composition of its consumer price index as part of a new inflation series, a move expected to reduce volatility in headline inflation readings and better reflect current consumption patterns, as per Reuters. 

Change in Food Weighting and CPI Structure  

Under the revised framework, the weighting of food in the CPI basket will be reduced to 36.75%, compared with the current 45.86%. Food prices are known to fluctuate due to weather conditions and supply disruptions, and the lower weighting is expected to moderate sharp swings in headline inflation.  

The CPI continues to serve as the anchor for the central bank’s inflation target of 4% with a tolerance band of plus or minus 2% points. 

The existing CPI basket is based on consumer spending patterns from 2011–12, which economists have said no longer reflect current behaviour.  

The statistics ministry said the new data series will adopt 2024 as the base year, with 2025 designated as an overlapping year to allow historical data to be statistically converted to the new base. 

Expanded Spending Groups and Consumption Trends 

The revised CPI basket will expand the number of major spending groups to 12 from 6, aligning India’s inflation measurement framework with international standards.  

Recent surveys indicate that food now accounts for 39.7% of urban household spending, down from around 43% in 2011–12, while the rural share has declined to about 47% from 53%. 

Housing, water, electricity, gas and other fuels will retain a weighting of 17.66%, remaining the second-largest contributor to inflation. Transport will account for 8.8%, while health at 6.10% and clothing and footwear at 6.38% continue to represent significant household expenses.  

Categories such as restaurants and accommodation, education, and information and communication will each carry weightings of around 3.5%, reflecting a shift towards a more service-oriented consumption basket. 

New Inclusions and Recent Inflation Data 

For the first time, rural house rent will be included in the CPI, with an expanded sample size for house rent in both rural and urban areas.  

Commenting on the change, Saurabh Garg, Secretary at the Ministry of Statistics and Programme Implementation, said, “For the first time, rural house rent has been included in the CPI. Further, in both rural and urban areas, the sample size for house rent has been increased.” 

The new CPI series will also begin tracking prices from e-commerce platforms, including items such as airfares, OTT subscriptions, telecom plans and selected services.  

India’s headline inflation rose to 1.33% year-on-year in December, the fastest pace in 3 months, as the decline in food prices moderated. Inflation in November stood at 0.71%. 

Read More: India Plans to Announce 15% Capital Subsidy for Lithium and Nickel Processing Plants! 

Conclusion 

The revised CPI framework marks a significant update to India’s inflation measurement, adjusting food weightings, expanding spending categories, and incorporating newer consumption trends to better reflect the evolving structure of household spending. 

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