New Consumer Price Index (CPI) Series
The latest Consumer Price Index (CPI) series introduced significant updates to address past shortcomings. This new series has a base year of 2024 and utilizes data from the Household Consumption Expenditure Survey 2023-24. The previous CPI was based on 2011-12 consumption patterns with a 2012 base year.
Key Changes and Updates
- The new CPI reflects the evolved consumption behaviors and household expenditure compositions, acknowledging that modern households have differing needs. For instance:
- 80 crore households now receive free foodgrain, altering their food spending patterns.
- Emergence of new services like OTT video streaming and online marketplaces.
- The weightage for food and beverages in the CPI has been decreased from 45.86% to 36.75%, considering its reduced proportion in household expenses.
- The index now covers a broader range of items, making it more granular and representative, particularly emphasizing new goods and services.
- Inclusion of data collection from more marketplaces nationwide, incorporating 12 online marketplaces for the first time.
Implications for Policy
- Enhanced accuracy in inflation data helps in:
- Macroeconomic stability and informed monetary and fiscal policy making.
- Stabilizing the overall index by providing a more realistic weightage for food, thus enhancing predictability in budget formulation.
- Assisting the Reserve Bank of India's Monetary Policy Committee in obtaining a precise inflation picture for setting policy interest rates.
- Current provision of a ‘linking factor’ by MoSPI requires public calculation of past inflation data in the new context; it is suggested that MoSPI directly provide this back data.
- It is recommended that the CPI be revised every five years to remain current, rather than waiting 11 years for updates.
