New CPI series aligned to consumption trends; CEA Nageswaran says monetary, fiscal policy decision calibration to improve

Chief Economic Advisor V Anantha Nageswaran on Thursday said the new Consumer Price Index (CPI) series will improve the quality of data used in formulating monetary and fiscal policies, as it better reflects current consumption patterns and economic conditions.

The National Statistics Office (NSO) under the Ministry of Statistics & Programme Implementation (MoSPI) released the new CPI series with Base 2024=100, expanding the basket to include more goods and services while excluding items that are no longer widely consumed. The weights of item groups have also been recalibrated based on the Household Consumption Expenditure Survey (HCES) 2023-24.




"Since the CPI basket is now aligned with recent expenditure data, the inflation signals derived from this will be more closely matched with the economic conditions. This improves the information basis for calibrating monetary and fiscal policy," Nageswaran told reporters at a press conference on the new CPI series, as reported PTI.

He said the new series, with wider coverage of services and digital markets, gives policymakers a more updated basis for assessing real incomes, consumption trends and purchasing power. The Reserve Bank of India factors retail inflation into its bi-monthly monetary policy decisions.

Nageswaran said if CPI volatility declines, fiscal expenditure, DA fixation and index-linked bonds, which are tied to CPI, would become more stable, predictable and reliable.

He added that the weight of the food basket has declined from 45.86 in CPI 2012 to 36.75 in the new series, partly reflecting the reallocation of some items to other categories such as restaurants and services.

"At the macro level, this reflects a progressive diversification of expenditure towards health, education, mobility, and connectivity, which is what you would expect to see from an economy which is seeing rising incomes and rising living standards," he said.

Nageswaran said lower weightage for the otherwise volatile food and beverages group could also make headline inflation less volatile. Such rebalancing, he said, is typically associated with income growth, productivity gains and improving living standards.

The revised basket also underlines the increasing role of services in overall consumption.

"This brings consumption measurement closer to the evolving structure of output and employment, where services account for a rising share of economic activity," he said.

He said the new series also recognises the growing role of digital channels in price formation and will help in better distinguishing urban and rural inflation trends at state, subclass and item levels.

Nageswaran added that the new CPI series, along with upcoming GDP and Index of Industrial Production (IIP) base revisions, will align India’s statistical framework with global best practices.