New CPI Series to Better Capture India's Consumption, Stay Below 4% Target

The report from the Bank of Baroda said, "The trajectory of core inflation needs to be closely watched as prices of precious metals pose upside risk. But with fine balancing of weights in the new CPI series, we expect it to be within the targeted 4+/-2 per cent level."

Bank of Baroda said the new series ensures headline CPI, the crucial target variable for monetary policy, remains contemporary and aligned with international practices.

The new series has better captured the seasonality in prices of the majority of food items by adjusting their weights, it commended.

"Going forward, we expect the government's supply side measures would be adequate to maintain a desirable food inflation trajectory," the bank forecasted.

Bank of Baroda's Essential Commodities Index ECI runs at -0.4 per cent YoY for the first 11 days of February 2026 and that, except for some edible oils and pulses, high‑frequency food prices are largely contained and do not pose immediate risk, the report said.

However, in the new base, food inflation has reversed the deflationary trend that was observed in the past series for the last 7 months. The bank attributed this change to reduction in weight of the most volatile basket of CPI which is the TOP (Tomato, Onion and Potato) vegetables.

The new series increases the number of weighted items to 358 from 299, covers 1,465 rural and 1,395 urban markets plus 12 online markets, and reduces the weight of food in the CPI basket to 40.1 per cent from 45.8 per cent.

Rural housing, online media/streaming services, value added dairy products, barley, pendrive and external hard disk amongst others have been included in the basket for CPI estimation.

Additionally, some components, such as radio, tape recorder, DVD player and second-hand clothing, etc that were used previously for estimation have now been removed.

- IANS