India will introduce a Consumer Price Index (CPI) series with 2024 as its new base year which will change the methods used to measure and assess retail inflation. The Ministry of Statistics and Programme Implementation (MoSPI) released documents which show that the updated CPI basket now assigns less importance to food and beverages while it raises the percentage of housing costs.

Food’s Share Reduced to Reflect Changing Consumption

The new CPI series introduces its most significant alteration through a decrease in food and beverage weight which now stands at 36.75% compared to the previous index’s 45.86% measurement. The high weight of food prices in India establishes their dominant role in inflation readings which produce dramatic fluctuations in headline inflation numbers while other price movements remain unchanged.

The situation became clear in 2025 when food inflation started its negative trend which continued from June onwards. October 2025 saw falling food prices lead to a record low of 0.25% for headline CPI inflation while non-food inflation stayed mostly stable. The long-standing debate between policymakers and economists centers on how inflation volatility distorts the true economic state of existence.

Housing Gains Prominence in the New CPI Basket

The CPI basket shows a greater weight on housing expenses because food costs have become less important. The change shows that households now spend more money on rent and utilities than what the 2023-24 Household Consumption Expenditure Survey (HCES) reports.

The updated index now provides better rent inflation measurement because it extends its assessment to include residential utility expenses, which cover water and electricity and gas and other fuel costs. The new methods will increase housing inflation rates, which will result in higher overall expenses for the consumer price index, despite the reduction of food-related price fluctuations.

What the New Weights Mean for Inflation Readings

Economists estimate that if inflation indices remain unchanged but weights are recalculated:

• During periods of low food inflation, overall CPI could be 20–30 basis points higher than under the current series.
• When food inflation is high, headline CPI could be 20–30 basis points lower compared to the old methodology.

In effect, the new CPI series is likely to smooth extreme ups and downs caused by food prices, while giving greater visibility to persistent inflation in housing and services.

Why the RBI Has Welcomed the Update

The Reserve Bank of India (RBI) has often expressed discomfort with the current CPI series, which is based on 2011–12 consumption patterns. As incomes rise, households tend to spend a smaller share on food—a principle explained by Engel’s Law—and this shift is clearly reflected in the latest HCES data.

Between 2011–12 and 2023–24:

• Rural households saw food’s share fall from 52.9% to 47.04%.
• Urban households saw food’s share decline from 42.62% to 39.68%.

Because monetary policy has limited impact on supply-driven food price shocks, high food inflation has previously constrained the RBI from cutting interest rates even when demand was weak. A lower food weight is expected to give the central bank more operational comfort under its inflation-targeting framework.

Inflation Targeting Framework Remains Intact

India’s Flexible Inflation Targeting (FIT) framework requires the RBI to keep CPI inflation at 4%, within a tolerance band of 2–6%. This framework is currently under review, with a new target for the next five years expected to be announced by March.

While most economists expect the framework to remain unchanged, the revised CPI composition—especially the lower food weight—could make inflation management more predictable and policy decisions less reactive to short-term food price shocks.

What Else Is Changing in the New CPI Series

The updated CPI basket reflects broader changes in consumption and methodology:

• The number of items has increased to 358 from 299 earlier.
• CPI categories have been reorganised, making direct comparisons with the old series more complex.
• Education services now appear as a standalone category with a 3.33% weight.
• To ensure continuity, MoSPI will release a linking factor between the old CPI (2012 base) and the new CPI (2024 base).

The first inflation data under the new series is scheduled for release on February 12, covering January inflation.

The Bigger Picture

Overall, India’s new CPI series aims to make inflation data more current, stable and representative of how households actually spend today. While lower food weight should reduce volatility in headline inflation, the rising importance of housing means price pressures may not disappear entirely—just shift focus to areas that better reflect modern consumption patterns.