New CPI Series: Key Changes, Features, and Impact on Inflation Measurement

The Ministry of Statistics and Programme Implementation (MoSPI) has released the new Consumer Price Index (CPI) series data based on the updated base year 2024.

• The previous series had a base year of 2012 and was based on consumption patterns of 2011-12
• The new series is reconstituted on the consumption basket based on the results of the 2023-24 Household Consumption Expenditure Survey (HCES).

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Features of New CPI Series

• Reduced Weight of Food and Beverages: The weight of food and beverages in the overall CPI has been reduced to 36.75% from 45.86%.
• Improved Representativeness: The revised CPI basket includes a larger number of goods and services, making the index more reflective of current consumption patterns.
• Wider Market Coverage: The new series expands price collection to more marketplaces across the country.
• Inclusion of Online Marketplaces: For the first time, prices from 12 online marketplaces have been incorporated into the CPI calculation.
• Alignment with International Standards: The revised CPI series follows the COICOP 2018 (Classification of Individual Consumption According to Purpose) framework, incorporating 12 consumption categories in line with global practices.
• Greater Granularity and Global Comparability: The transition from the earlier 6 broad groups to 12 detailed divisions enhances classification depth and improves comparability with international inflation benchmarks.
• New CPI Basket: The new CPI basket contains 358 goods and services, up from 299 in the erstwhile basket.
  • Removed items: VCR/VCD/DVD players, tape recorders, radios, CD/DVD cassettes, second-hand clothing, coir/rope.
  • New Items Added:
    • Rural house rent (introduced for the first time)
    • Online media and streaming services
    • Value-added dairy products
    • Barley and related products
    • Pen drives, external hard disks
    • Attendant and babysitter services
    • Exercise equipment
    • Cleaner fuels (CNG/PNG)

Need for Revision

• Outdated Base Year and Survey Data: The old CPI series was based on the 2012 base year and consumption patterns from the 2011-12 survey, which no longer reflect current economic realities.
  • For Example: 80 crore households receive free foodgrain now, which naturally reduces how much they need to spend on food.
  • Simultaneously, several new service offerings have emerged, such as over-the-top (OTT) video streaming, and online marketplaces. The new series tries to address these changes.
• Need for a Contemporary Inflation Measure: India’s consumption behaviour has evolved significantly over the past decade, necessitating a more contemporary inflation measure.

About Consumer Price Index (CPI)

• CPI measures the change in the retail prices of a representative basket of goods and services consumed by households over time.
• Published By: National Statistical Office (NSO) under the Ministry of Statistics & Programme Implementation (MoSPI).
• Frequency: CPI is released monthly.
• Base Year: 2024.
• Types:
  • CPI for Industrial Workers (CPI-IW): Compiled by the Labor Bureau.
  • CPI for Agricultural Labourers (CPI-AL): Compiled by the Labor Bureau.
  • CPI for Rural Laborers (CPI-RL): Compiled by the Labor Bureau, it reflects price movements specifically for rural laborers.
  • CPI Combined: Compiled by the NSO

Significance of CPI

• Primary Inflation Gauge: It serves as India’s main measure of retail inflation, capturing changes in consumer prices across urban and rural India.
• Monetary Policy Anchor: Acts as the nominal anchor for RBI’s inflation-targeting framework (4% ± 2%), guiding interest-rate decisions.
• Indexation Tool: It is used for indexation such as Dearness Allowance (DA) for government employees and various social-sector transfers.
• Real Sector Analysis: It helps deflate national accounts to derive real GDP and other real economic indicators.

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CPI vis-i-vis WPI

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