Basket of Consumer Price Index (CPI) is set to be bigger, Rao Inderjit Singh, Minister of State (Independent Charge) in Ministry of Statistics and Programme Implementation, has said. CPI is used to derive retail inflation.
In an interview to businessline, Singh said that there are around 407 items on which information on quantity and/or value of consumption by households have been collected through field survey in Household Consumption Expenditure Survey (HCES) 2023-24 by NSO.
“Weighing diagram of the CPI for the new base is being derived using the data of HCES 2023-24. The weighing diagram has not been finalised yet. The number of items is expected to increase in CPI basket in comparison to the existing series,” he said.
Excluding food from inflation targeting
Though there is no clarity about fresh addition in the basket, the Economic Survey of 2023-24 advocated removing food from inflation targeting. Itpointed out that short-run monetary policy tools are meant to counteract price pressures arising out of excess aggregate demand growth.
“Deploying them (short-run monetary tools) to deal with inflation caused by supply constraints may be counterproductive. Therefore, it is worth exploring whether India’s inflation targeting framework should target the inflation rate excluding food,” the Survey noted.
The food and beverage category makes up 54.2 per cent of the current CPI basket. Overall, the current basket has 299 items. While 40 items represent services, the remaining 259 items represent goods. Together, the 40 items representing ‘Services’ account for 23.36 percent of the total weight, while the 259 items representing ‘Goods’ account for 76.6 per cent of the overall CPI basket.
The price data are collected from selected 1,114 urban markets and 1,181 villages covering all States/UTs through personal visits by field staff of Field Operations Division of NSO, MoSPI, on a weekly roster.
New base year
Singh informed that base year for the CPI will change. At present the base year is 2012. “For CPI, 2024 has been identified as the revised base year as the item basket and the weightage of the items would be decided based on the NSO’s Household Consumer Expenditure Survey (HCES) conducted in 2023-24. The new CPI series is expected to be published from the first quarter of 2026,” he said.
The base year for CPI was last revised in 2015 when it was changed to 2012 from 2010 and the revised series was released w.e.f. January, 2015. The basket of items and their weighing diagrams were prepared using the Modified Mixed Reference Period (MMRP8) data of Consumer Expenditure Survey (CES), 2011-12, which is the 68th Round of National Sample Survey (NSS).
Originally, CPI figures were developed to track changes in the cost of living for workers so that their wages could be adjusted in line with price movements. Over time, however, the CPI has evolved into a widely used macroeconomic tool. It is now a key benchmark for targeting inflation, monitoring price stability, and guiding monetary policy decisions by the Reserve Bank of India (RBI). It also serves as a deflator in the National Accounts to measure real economic growth.