Why Food Matters Less in India’s New CPI and What It Means for RBI 30Jan2026
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India’s inflation numbers are about to change in a way that has little to do with actual price movements. From Jan2026, India will adopt a new Consumer Price Index with a revised consumption basket.
The new basket may better reflect how households spend today, compared to the 2012 CPI series.
The most consequential shift is a sharp reduction in the weight of food in the inflation index.
This change follows recommendations of an Expert Group constituted by MoSPI (Indian Ministry of Statistics and Programme Implementation).
MoSPI constituted the Expert Group to review and update the CPI basket and methodology.
The group used the latest household consumption data to update item weights, adopt global classification standards and better capture spending on services and modern consumption patterns.
The shift will reshape how inflation behaves—and how the Reserve Bank of India, India's central bank, reads it.
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2. Why Change the CPI Consumption Basket:
The Need for Changing the CPI Basket: Over the past decade, household spending patterns in India have shifted significantly, especially after COVID-19, with more expenditure on services, housing, transport and digital consumption.
The old 2012 CPI basket no longer reflected these changes, leading to a gap between measured inflation and actual cost of living.
Updating the basket is essential to ensure that the CPI remains a reliable guide for policy, wages and social benefits.
The Expert Group revised the CPI basket by reducing the weights of some items and increasing others, based on the latest household consumption data and international standards.
However, the report does not explicitly explain why specific items were added, removed or regrouped.
Possible reasons for introducing changes in the CPI consumption basket include:
> shifts in household spending patterns, as reflected in household surveys
> rising importance of services in consumer spending,
> adoption of Classification of Individual Consumption According to Purpose (COICOP 2018), and
> the need for a CPI that reflects modern consumption rather than historical weights.
The CPI 2024 basket adopts COICOP 2018, the international standard for classifying household consumption, to improve global comparability and consistency in reporting.
Household consumption has shifted, especially after COVID-19 outbreak, away from food toward housing, transport, leisure, health and other services.
The new CPI weights are based on the latest 2023–24 household consumption expenditure survey (HCES), ensuring the index closely resembles current spending patterns and present cost of living.
Adopting global standards and revised data helps make the CPI more accurate, credible and comparable internationally.
3. The New CPI 2024 Basket: Key Changes:
Having looked at why the CPI basket is being revised, it’s important to see how the weights themselves are shifting in the new 2024 series.
The CPI 2024 basket shows some significant changes compared to the 2012 series (see chart below).
The biggest reductions are in Food and Beverages, which falls by 9.11 percentage points to 36.75 per cent from 45.86 per cent, and Fuel and Light, which declines by 1.48 points to 5.36 per cent from 6.84 per cent.
The biggest drop in food weight—9.11 percentage points—reflects shifts in household spending pattern, as captured in the latest 2023–24 expenditure survey. Actually, the food weight drop amounts to nearly one-fifth reduction from its earlier share in the CPI basket.
This is a substantial structural shift and will materially change how headline inflation responds to food price movements.
The lower food weight also reflects greater diversification in diets and a declining share of staples in household budgets.
The weight of Fuel and Light was reduced by 1.48 percentage points because households now spend proportionately less on energy and fuels compared to other items.
These drops can be seen as households allocating a smaller share of their budgets to staples like food and energy, though it’s not clear how closely the revised CPI will ultimately reflect actual household spending patterns.
Meanwhile, several categories gain prominence. Transport and Communication rises by 3.82 percentage points to 12.41 per cent (8.59 per cent), reflecting higher household spending on mobility, communication and digital services.
A new category, Restaurants and Accommodation, is introduced with a 3.35 per cent weight, capturing dining out and short-term lodging expenses.
Housing also increases by 2.23 points to 12.30 per cent (10.07 per cent), reflecting higher spending on rent and related costs, while Personal Care and Effects rises by 1.15 points to 5.04 per cent (3.89 per cent), accounting for growing expenditure on grooming, cosmetics and personal goods.
These shifts highlight a broader trend:
India’s consumption is moving away from staples toward services, housing and lifestyle-related spending.
It looks like the new CPI basket captures this evolution, giving a more accurate picture of modern household expenditure and its impact on inflation measurement.
Top five items in new CPI 2024:
36.75% Food and Beverages
12.41% Transport and communication
12.30% Housing
6.10% Health
5.53% Clothing
73.09% total of five items
Looking at the CPI 2024 basket as a whole, just five categories make up over 73 per cent of total household spending.
This concentration shows that while staples like food still dominate, services, housing and health are increasingly important in measuring India’s cost of living.
As an aside, the CPI revision was long overdue, coming after a 12-year gap. This delay has directly impacted savers and workers, whose Dearness Allowance is linked to the CPI for industrial workers.
Using the old basket meant DA increases were smaller than they should have been, since it no longer reflected current household spending patterns. The new CPI should provide a more accurate basis for compensation adjustments.
In fact, yours truly has been calling for a CPI revision since 2021, highlighting the need for an updated basket that reflects current household spending patterns (see tweet).
Chart: CPI Weights: 2024 Series versus 2012 Series (All India Combined) and Changes >
Use the latest Household Consumption Expenditure Survey (2023–24) to determine item weights in the CPI 2024 basket.
Set the base year as 2024, with prices collected from January to December 2024. The index will be set at 100 for this period.
Adopt COICOP 2018 classification for better international comparability.
Introduce new categories like Restaurants & Accommodation and increase weights for services, transport, communication and personal care to reflect modern consumption patterns.
Better methodology:
Online prices will be collected from 12 major towns — Bombay, Delhi, Bangalore, Hyderabad, Ahmedabad, Madras, Calcutta, Surat, Pune, Jaipur, Lucknow and Kanpur — each with over 25 lakh people, to better capture trends in e-commerce spending.
To better capture online shopping trends, price data will be collected from online / e-commerce markets, such as, Amazon India, Flipkart, Blinkit and BigBasket.
In earlier 2012 series, there was no such collection from online markets.
The CPI 2024 will collect price data from 1,465 rural markets (up from 1,181) and 1,395 urban markets (up from 1,114) across 434 towns (earlier 310).
The number of items in the CPI basket has also increased to 358, compared to 299 in the 2012 series, expanding coverage to better capture household spending and emerging consumption trends.
Timeline for New Series:
As per MoSPI, Timeline for New Series is as follows:
The new series of CPI (base year 2024) to be released on 12Feb2026.
The new series of GDP (base year 2022-23) will be released on 27Feb2026.
The new series of IIP (base year 2022-23) is slated for release on 28May2026.
5. How RBI Will See the New CPI Series
Low impact of food inflation:
The lower food weight—from 45.86 per cent in the 2012 series to 36.75 per cent in CPI 2024—will significantly affect how headline inflation is interpreted.
With food accounting for a smaller share, sharp rises in vegetable, cereal or other staple prices will have a dampened impact on overall CPI inflation.
This might make the new CPI appear more stable than the old one during periods of volatile food prices.
At the same time, higher weights for housing, transport, communication, services and personal care mean that trends in these areas will carry more influence in the inflation gauge.
For the RBI, this could shift the focus toward broader price pressures rather than purely food-driven spikes.
In short, while food inflation will still matter, the new CPI series may moderate headline swings and could influence the timing and intensity of monetary policy responses.
Policymakers will need to look carefully at component-level inflation to understand the real pressures on households.
Upcoming RBI Review of MPF / FIT:
The Reserve Bank of India is, by mandate, scheduled to review its Monetary Policy Framework (MPF) in Mar2026, and with the new CPI in place, the RBI may have greater clarity on inflation trends and underlying price pressures [see tweet].
As part of its flexible inflation targeting (FIT) mandate, the RBI will likely continue to aim for its 4 percent inflation target, with a tolerance band of 2–6 percent, in the upcoming March 2026 review.
The central bank may operate with greater confidence now that the new CPI better reflects modern consumption habits, including online shopping.
6. Closing thoughts
India’s CPI is getting a long-overdue update after 12 years, with the new 2024 basket promising to account for modern consumption patterns. Food and fuel weights have been cut, while housing, transport, communication services and personal care now carry more influence.
A new item of consumption, namely, Restaurants and Accommodation, has been added to the revised CPI basket.
Online shopping and a wider coverage of items and markets make the index more representative of today’s households. For the RBI, this means headline inflation may appear more stable, even when food prices are volatile, giving policymakers greater clarity in managing monetary policy.
At the same time, the revised CPI provides a fairer basis for workers’ Dearness Allowance and social benefits, aligning official inflation measures more closely with how Indians actually spend.
(Thanks for your patience, I could only complete the blog post by 10 PM!)
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References and additional data:
India New CPI 2024 Series - Expert Group on Comprehensive CPI Revision
PIB press release 28Jan2026 new base year for CPI, GDP and IIP
Tweet thread 17Dec2025 India New GDP series - new base year for GDP FY 2022-23 - ACNAS - timeline for GDP releases - GDP revision - Revised GDP - GDP back series
Tweet thread 17Dec2025 India New CPI series - CPI base year - CPI basket revision - Revised CPI - GDP / CPI data quality - CPI new base year 2024 - data collection from e-commerce websites
Tweet thread 25Aug2025 Ecommerce, quick commerce and inflation control / MOSPI scrapping ecommece prices for CPI data - CPI basket revisions - CPI basket weights - CPI revision - ISP index of services production
Screen shots from PDF of Expert Group Report On CPI Revision >
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