India's New CPI Series Reveals 2.8% Inflation in January
The National Statistics Office (NSO) released its first retail inflation data under a revamped consumer price index (CPI) series on Thursday, showing a rate of 2.8% for January. This new series, which updates the base year to 2024 from 2012, incorporates data from the household consumption survey of 2023-24 to better align with evolving spending habits across the country.
Key Changes in the Updated CPI Framework
The most significant adjustment in the new series is the reduction in the weight of food and beverages to approximately 37%, down from 46% in the previous 2012-based series. This shift aims to capture the declining share of food in household expenditures while increasing the importance of housing, services, and transport-related items. Despite the reduction, food remains the largest component in the index.
Expanded Item Coverage: The number of items tracked has risen from 299 to 358, with goods increasing from 259 to 308 and services from 40 to 50. This expansion enhances the representation of the services sector, reflecting its growing role in consumer spending.
Detailed Inflation Figures and Sectoral Insights
In January, food inflation was estimated at 2.1%, contributing to the overall headline figure. Rural inflation was marginally lower at 2.7%, compared to urban inflation at 2.8%. Under the old series, retail inflation in December 2025 was recorded at 1.3%.
Notable surges were observed in specific categories:
- Personal care, social protection, and miscellaneous goods, including gold and silver jewellery, surged by 19%.
- Silver jewellery inflation soared nearly 160% during the month.
Enhanced Data Collection and Modern Consumption Items
The new series introduces several improvements to data coverage:
- Rural Housing: For the first time, rural house rent has been included to better capture housing consumption in rural areas.
- Modern Items: Strengthened representation of contemporary consumption items such as online media services and fuels like CNG and PNG.
- Digital and Administrative Sources: Improved coverage of data from digital platforms and administrative records, including telephone charges, rail and air fares, fuel costs, postal charges, and OTT subscriptions.
Economic Implications and Expert Analysis
The reduction in food weight is expected to temper volatility in inflation numbers, as high food weights in the old series often led to fluctuations that prompted calls for revision from policymakers. Aditi Nayar, chief economist at ratings agency Icra, commented, "Our preliminary assessment is that the expected uptick in CPI inflation in FY2027 relative to FY2026 was largely anticipated to be driven by the food and beverages segment. With a somewhat lower weight for F&B in the new series vis-à-vis the old series, the expected base-effect led uptick in the headline print in FY2027 would likely be tempered."
This update marks a crucial step in modernizing India's inflation measurement, ensuring it more accurately reflects current economic realities and consumption trends.
