India's Inflation Measurement Gets Major Digital-Age Overhaul
India is set to revolutionize how it measures retail inflation by incorporating modern digital consumption patterns into its official calculations. The Union statistics ministry announced on Thursday that the country will shift to a new Consumer Price Index (CPI) series with 2024 as the base year, effective from February 12, 2025. This comprehensive overhaul comes after recommendations from an expert group aimed at reflecting changing household consumption behaviors, new services, and global best practices in inflation measurement.
What's Changing in the CPI Basket
The new CPI series will see significant expansion and modernization of the consumption basket. The number of weighted items will increase from 299 to 358, organized across 12 divisions, 43 groups, 62 classes, and 192 subclasses. This structure utilizes consumption data from the Household Consumption Expenditure Survey (HCES) 2023-24, ensuring it captures contemporary spending patterns.
Key additions to the basket include:
- Smartphones and digital devices
- OTT (over-the-top) and online media services
- App-based transport services like Uber and Ola
- International airfares
- Rural house rents
Outdated items being removed:
- Video-cassette recorders (VCRs)
- Audio cassettes
The expert group report released on Thursday outlined wide-ranging methodological, structural, and data-collection reforms designed to make inflation data more accurate, credible, and globally comparable.
Enhanced Data Collection Methods
To improve data quality and reduce field-level burden, the expert group recommended extensive use of technology and administrative data sources. Prices from 12 major e-commerce platforms will be tracked weekly, while centrally administered prices—including fuel, rail fares, telecom services, and postal charges—will be compiled directly by the statistics ministry using official data.
Electricity tariffs will be collected for four standard consumption slabs across all distribution companies. Airfare pricing will reflect advance booking windows of 21 days for domestic travel and 60 days for international travel, mirroring actual consumer behavior patterns.
Methodological Improvements
The report recommends several technical enhancements to inflation calculation:
- Switching to Jevons' short index formula at the elementary level for better quality adjustment
- Improved treatment of missing prices through imputation rather than weight redistribution
- Inclusion of a rural house rent index and correction of anomalies seen in the earlier series
- Standardized pricing of gold and silver jewellery based on commonly available designs
Notably, free food items distributed under Pradhan Mantri Grameen Kalyan Anna Yojana will not be counted, aligning with global norms that CPI should reflect only actual household expenditure. Employer-provided accommodation will also be excluded from the CPI 2024 series.
Why This Revision Was Necessary
The expert group, comprising economists from leading academic institutions, senior officials from the Reserve Bank of India (RBI), and central government representatives, concluded that the existing CPI 2012 series no longer fully captures how Indian households spend their money. The rise of digital services, e-commerce, app-based transport, and changing housing patterns necessitated this comprehensive update.
According to the report, household consumption behavior in India has undergone a structural shift over the past decade, driven by urbanization, digitization, higher spending on services, and new delivery channels such as online platforms. Continuing with an outdated consumption basket risked misrepresenting inflation trends, weakening monetary policy signals, and distorting welfare assessments.
The revision also aims to align India's inflation framework with international statistical standards, particularly the classification of Individual Consumption According to Purpose (COICOP) 2018, which is widely used by advanced and emerging economies.
Expected Benefits of the New CPI
The new CPI series is expected to provide a more accurate picture of inflation, especially services inflation, thereby improving the effectiveness of RBI's monetary policy decisions. It will enhance state-level and item-level inflation analysis while increasing transparency and credibility for investors and global institutions.
The Ministry of Statistics and Programme Implementation (MoSPI) will release back-series data from January 2013 to ensure continuity between CPI 2012 and CPI 2024, along with detailed item-level indices across states and rural-urban segments.
The first CPI 2024 release will provide inflation data for January 2026, alongside historical indices from January 2025 onwards. This CPI revision forms part of a broader statistical upgrade, with a new GDP series (base year 2022-23) also scheduled for release in February 2026, signaling a major refresh of India's core economic indicators.
