Consumer Price Index (CPI) – New Series (2024)

 

Consumer Price Index (CPI) – New Series (2024)

✅ Key Updates

• New Base Year: 2024

• Data Source: Household Consumption Expenditure Survey (HCES) 2023–24

• Old Base Year: 2012 (based on 2011–12 consumption patterns)

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🔄 Why Revision Was Needed

• India’s economy & consumption patterns changed significantly:

  • Expansion of service economy

  • Rise of digital consumption (OTT, online shopping)

  • Free foodgrain scheme reducing out-of-pocket food expenses

  • Emergence of new goods/services

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⚖️ Major Structural Changes

🍚 Reduced Weight of Food & Beverages

Component	Old Series	New Series
Food & Beverages	45.86%	36.75%

Significance:

• Food inflation earlier had outsized impact

• Aligns CPI with current spending behaviour

• Improves index stability (food prices highly volatile)

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🛍️ Expanded Basket of Items

• Covers more goods & services

• Better granularity & representativeness

• Reflects:

  • Digital services

  • Modern consumption choices

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🌐 Inclusion of Online Marketplaces

• First-time inclusion of 12 online platforms

• Recognizes shift to e-commerce & digital pricing

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🏬 Wider Data Collection

• More markets & locations across India

• Improves accuracy & national representativeness

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📊 Implications for Economy & Policy

🏛️ Monetary Policy

• CPI is the primary inflation target for:

  • Reserve Bank of India (RBI)

  • Monetary Policy Committee (MPC)

• Updated CPI → Better interest rate decisions

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💰 Fiscal Policy & Budgeting

• CPI-linked components:

  • Dearness Allowance (DA)

  • Dearness Relief (DR)

• More stable CPI → Better expenditure forecasting

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🌾 Inflation Stability

• Food inflation = volatile (weather, supply shocks)

• Reduced weight → Less distortion in headline CPI

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⚠️ Concerns / Criticism

🔗 Back Data Not Provided

• MoSPI only gave linking factor

• Aspirants/analysts must manually convert old data

Suggested Improvement:

• Release historical back series

• Enables easier comparative analysis

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📅 Revision Frequency

• Gap between revisions: 11 years

• Planned norm: Every 5 years

Why Important?

• Economy evolves rapidly

• Prevents methodological obsolescence

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🏢 Institutional Role

MoSPI

• Compiles & releases CPI

• Responsible for methodology updates

RBI

• Uses CPI for inflation targeting

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📝 Exam-Relevant Takeaways

✔ Base Year updated to 2024

✔ Basket revised using HCES 2023–24

✔ Food weight reduced → more stability

✔ Online marketplaces included

✔ Impacts monetary & fiscal policy

✔ Need for regular 5-year revision