India's New CPI Series (Base Year 2024)
The new Consumer Price Index (CPI) series, launched using 2024 as a base year, reflects significant shifts in household consumption trends over the past decade.
Key Highlights
- The CPI inflation rate in January stood at 2.75%, with rural inflation at 2.73% and urban at 2.77%.
- Food inflation shifted from negative to 2.1% in the new series.
Impact on Economic Policy
- The decreased weightage of the food and beverages category may reduce volatility in headline inflation.
- Monetary policy could become more focused on aggregate demand rather than supply-induced inflation.
- Improved assessment of development indicators like poverty levels.
Benefits of the New Series
- More accurate measurement of housing costs across rural and urban areas.
- Improved poverty estimates and better targeting of welfare schemes.
- Reflects Engel's Law with decreased proportion of expenditure on food.
- Enhanced measurement of consumption patterns aligning with increased income and living standards.
Methodological Updates
- The new series aligns with international standards using 12 divisions instead of six.
- Weighted items in the basket increased from 299 to 358, with a notable rise in services from 40 to 50 items.
- Inclusion of rural housing, digital media services, and exclusion of obsolete items like VCRs.
Future Plans and Developments
- Regular updates to the CPI base year are planned, following international norms of revising every five years.
- Upcoming revisions in national accounts to enhance data quality and comparability.
The new CPI series aims to provide a more accurate and comprehensive understanding of inflation by incorporating modern consumption trends and improving data collection and analysis methods.
