What is CPI and why is the base year adjusted?
The CPI measures changes in the prices of goods and services consumed by households, serving as a key indicator of cost-of-living inflation. The base year is the reference point against which price changes are measured, its index set at 100.
As household consumption patterns evolve, the base year is updated periodically to ensure that the index remains representative. The new series uses 2024 as the base year, gathering item weights from the Household Consumption Expenditure Survey (HCES) 2023-24.
Revised weights reflect changing consumption patterns. The share of food and beverages has decreased from 45.86% to 36.75%, while the weightage of transport and communication, housing and utilities and personal care has increased.
What has changed?
The CPI basket has been expanded to 358 items (308 goods and 50 services), compared to earlier 299. It is organized into 12 branches, 43 groups and 92 classes. Price collection has also expanded, now covering 1,465 rural markets (up from 1,181) and 1,395 urban markets (up from 1,114). New additions include AirPods, hand sanitizers, OTT subscriptions, air purifiers, e-commerce purchases, and international airfares. Old items such as library fees, radio and horse-drawn carriage rentals are removed. Despite the revamp, about 98% of the basket remains comparable to the previous series.
The government has released more detailed data across all disaggregated levels, including state-level and sector-level indicators.
What’s new in the latest series?
For the first time, prices from 12 online markets in cities with a population above 2.5 million have been included to pick up e-commerce trends. Goods supplied free under government schemes – such as food distributed through the public distribution system – are excluded, as the CPI measures household expenditure rather than consumption. Most service prices will now be sourced directly from official or digital platforms: air fares (from airline websites), OTT subscription platform prices (telephone corporation prices) (India Post), and fuel prices (ministry database).
what else
In future, the base year will be revised every five years to adjust to economic changes, while the household consumption expenditure survey will be conducted every three years.
