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New CPI Basket Cuts Food Weight, Adds Services—Inflation Trend Steady

The new Consumer Price Index series with a 2024 base reflects updated consumption patterns, including a significant reduction in the weight of food and beverages. It incorporates modern goods and services while removing outdated items, expanding the basket to 358 weighted items. Despite these structural changes, the overall inflation trajectory remains largely unchanged, with only minor variations between the old and new series. The report highlights that inflation weight is highly concentrated, making it easier for policymakers to track key trends.

Key Points: New CPI Series: Lower Food Weight, Services Gain, Inflation Unchanged

  • Food weight drops to 36.75% from 45.86%
  • Core inflation appears more moderate in new series
  • Basket expands to 358 items, adds digital services
  • Inflation variation between old and new series is minimal
  • 50% of CPI weight concentrated in just 26 items
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Revised CPI basket signals shift toward services, lower food weight, inflation trend largely unchanged: SBI

India's new CPI basket reduces food weight, adds modern services; SBI Research says inflation trend remains largely unchanged with minor variations.

"CPI new series is a veritable storehouse for robust data-based policy signals - SBI Research"

New Delhi, March 6

The new Consumer Price Index series with base year 2024 reflects significant structural changes in consumption patterns and inflation measurement, but is unlikely to materially alter the overall inflation outlook, according to a report by SBI Research.

The report notes that the new CPI framework incorporates updated consumption trends, urbanisation patterns and modern goods and services, while remaining largely aligned with the inflation readings of the previous series.

As a result, the transition to the new series is expected to provide more granular policy signals without causing major disruptions to debt markets or monetary policy interpretation.

It stated "CPI new series is a veritable storehouse for robust data-based policy signals.... CPI is not evenly distributed across 358 items. This is extremely useful for inflation nowcasting (focus on heavy weights), corporate pricing strategy (watch categories that "matter") and scenario analysis (e.g., rent shock + fuel shock + milk shock)"

According to SBI Research, the difference between inflation calculated using the old and new CPI series remains very small. The variation is within a tight range of about plus or minus 20-23 basis points, indicating that the change in base year does not significantly alter the inflation trajectory.

For example, inflation for January 2026 under the new CPI series was around 2.74 per cent compared with 2.59 per cent under the older series.

The report highlighted that India's headline CPI under the new framework stood at about 2.75 per cent, while core inflation was estimated at around 3.38 per cent.

Notably, the new series shows lower core CPI compared with the earlier series, suggesting that underlying inflation pressures appear more moderate under the revised structure.

A key structural shift in the new CPI series is the reduced weight of food in the inflation basket. Food and beverages now account for about 36.75 per cent of the CPI basket, significantly lower than the 45.86 per cent share in the 2012 series.

At the same time, categories such as housing, transport, health and communication have gained higher importance in the CPI basket.

The report also pointed out that the CPI basket now includes 358 weighted items compared with 299 earlier, capturing modern consumption habits such as online media services, value-added dairy products and digital storage devices. Meanwhile, outdated items like VCRs have been removed from the basket.

Despite the expansion in items, inflation dynamics remain concentrated in a limited number of products. Around 50 per cent of CPI weight is captured by just 26 items, while 90 per cent of the weight is accounted for by 148 items.

This concentration makes it easier for policymakers and analysts to track inflation trends and conduct nowcasting by focusing on high-weight categories.

Overall, SBI Research said the revised CPI series offers a more contemporary picture of India's consumption structure and inflation dynamics.

- ANI

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Reader Comments

R
Rohit P
Good to see the weight of food coming down. It shows our economy is maturing beyond just basic needs. But I hope this doesn't make policymakers ignore food price shocks that still hurt millions of poor households. The headline number might look stable, but dal-roti inflation is real for many.
S
Sarah B
As an analyst, the "nowcasting" focus on 26 key items is the most practical takeaway. Tracking 358 items is impossible. This granularity will help businesses plan better. Kudos to the team for a sensible update.
A
Aman W
Lower core CPI under the new series is interesting. Does this mean our underlying inflation pressure was actually overestimated before? If so, it gives the RBI more room to support growth. A positive signal for the markets.
N
Nisha Z
While the shift to services is accurate for cities, I have a respectful criticism. In my hometown in Bihar, food is still over 50% of monthly spending. I hope the national average doesn't mask vast regional disparities in consumption patterns. The basket should perhaps have state-wise weights.
V
Vikram M
Housing and transport getting higher weight is bang on. My EMI and petrol bill are my biggest headaches now, not vegetables (most of the time!). This data will lead to better policy. Good move.

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