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New CPI Series to Keep Inflation Below 4% Target, Says Bank of Baroda Report

A Bank of Baroda report states the new Consumer Price Index (CPI) series, with its rebalanced weights, is expected to keep inflation below the 4% target. The January 2026 headline CPI reading came in at 2.8%, with most sub-components showing no stress. The new series reduces the weightage for volatile items like gold and TOP vegetables, aligning better with current consumption patterns. While high-frequency food prices are largely contained, the report cautions that core inflation, particularly from precious metals, requires close monitoring.

Key Points: New CPI Series to Keep Inflation Below 4% Target: BoB

  • New CPI series rebalances item weights
  • Headline CPI at 2.8% in Jan 2026
  • Lower weight for gold and TOP vegetables
  • Core inflation trajectory needs monitoring
2 min read

CPI likely to stay below 4% even under new series due to better balance of items in Basket: BoB Report

Bank of Baroda report says new CPI series with rebalanced weights will keep inflation within the 4% target, citing lower gold and TOP vegetable weights.

"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 Report"

New Delhi, February 13

The Consumer Price Index is expected to remain below the 4 per cent target level even under the new series due to a fine balancing of weights, according to a report by Bank of Baroda.

The report noted that the new series is pragmatic as it captures the evolving consumption curve of India. The changes in data coverage and methodology will ensure that headline CPI, which is the crucial target variable for monetary policy decisions, remains contemporary and aligned with international practices.

It stated "with fine balancing of weights in the new CPI series, we expect it to be within the targeted 4+/-2 per cent level"

As per the report, the January 2026 reading of headline CPI came in at 2.8 per cent, in line with the bank's estimate of 2.9 per cent. Most of the subcomponents of inflation showed no signs of stress. However, volatility persisted in personal care, social protection and miscellaneous goods, largely driven by gold prices.

The report noted that the new series assigns a lower weightage to gold and other ornaments than the previous series.

Similarly, the weight of Tomato, Onion and Potato (TOP) vegetables has also been reduced under the new series. The report said this change efficiently captures the earlier biases that existed in the 2011-12 CPI series and would be crucial from a monetary policy standpoint.

According to the report, the more structured series is holistic in nature as it aligns with the consumption expenditure survey and has higher coverage of items to reflect India's evolving consumption pattern.

The bank's in-house BoB ECI is running at -0.4 per cent on a year-on-year basis for the first 11 days of February 2026.

The report added that, except for a few items such as edible oils including groundnut oil, sunflower oil and soya oil, and pulses like Tur and Urad, high-frequency food prices are largely contained and do not pose any immediate risk in the near term.

However, the report cautioned that the trajectory of core inflation needs close monitoring as prices of precious metals pose an upside risk. Even so, with the fine balancing of weights in the new CPI series, Bank of Baroda expects inflation to remain within the targeted 4+/-2 per cent level.

- ANI

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Reader Comments

P
Priya S
While the theory sounds good, I'll believe it when I see it reflected in my monthly grocery bill. 😅 Pulses and edible oils are still mentioned as risks, and those are kitchen staples. Hope the "fine balancing" actually helps control the prices we pay every day.
V
Vikram M
Aligning with international practices is important, but we must ensure the index truly reflects the Indian consumption basket. Reducing weight of gold is pragmatic, but I hope services like healthcare and education, which take a big chunk of middle-class income, are adequately covered.
S
Sarah B
As an expat living in India, it's interesting to see the focus on domestic consumption patterns. The volatility in gold prices affecting inflation metrics was always a unique challenge here. A more stable CPI should give the RBI more consistent policy tools.
R
Rohit P
Good to see the index is being updated. The 2011-12 series was outdated. Our spending has changed a lot since then - more on internet, apps, entertainment, etc. The new series must capture this digital expenditure to be accurate.
M
Michael C
With all due respect to the BoB report, there's a risk here. By reducing weights of volatile items like food and gold, the CPI might appear more stable on paper, but will it mask the real price pressures felt by households? The proof will be in the long-term accuracy.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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