Overhaul of Consumer Price Index (CPI) to 2024 Base Year
The update to the CPI has resulted in significant shifts in state-level inflation rankings for January, introducing new weights, a restructured market basket, and revised classification.
State-Level Inflation Changes
- Telangana: Inflation rate at 4.92%, ascending to the highest in the country from 13th position in December 2025.
- Kerala: Slipped to second place with an inflation rate of 3.67% from the top position.
- Tamil Nadu: Rose to third place with a rate of 3.36%, previously at sixth.
- Rajasthan: Increased to fourth at 3.17%, up from 26th.
- Manipur: Recorded the lowest inflation at 0.12%, down from its 11th position at 2.08% in December.
Notable Changes in Inflation Dynamics
The highest inflation rate among states has decreased to 4.92% from 9.49%, with no state experiencing deflation in January 2026, a contrast to December 2025 when nine states were in negative inflation.
Reasons for Re-ordering
- New Weights: Derived from the Household Consumption Expenditure Survey (HCES) 2023-24, reflecting varied consumption patterns by state.
- Market Frame Expansion: Enhanced urban coverage and more markets in peri-urban and smaller towns, especially impacting states like Telangana and Rajasthan.
- Alignment with COICOP 2018: Updated item structure with splitting and reallocation of categories, ensuring cleaner data classification.
Insights by P C Mohanan
P C Mohanan, a member of the National Statistical Commission, highlighted potential anomalies due to smaller sample sizes at the state level, leading to volatility in item-level indices. He cited Kerala’s inflation drop from nearly 10% to under 4% as an example of potential instability in state-level weighting diagrams compared to national ones.
