Context:

• Inflation, one of the most closely monitored macroeconomic indicators, directly affects household expenses and daily living.
• The Consumer Price Index (CPI) measures this impact by tracking changes in the prices of goods and services commonly consumed by households.
• In essence, CPI reflects the rising or falling cost of essentials—such as food, rent, and fuel—making it a practical indicator of how inflation shapes everyday life.
• This article highlights the significance of India’s Consumer Price Index (CPI) base revision to 2024, explaining how updated consumption patterns, modern data systems, and improved methodology ensure that inflation measurement remains aligned with changing household realities and policy needs.

CPI Base Revision 2024: Reflecting India’s Changing Consumption Patterns

• Why CPI Is More Than Just a Number?
  • Though expressed as a single figure, the CPI represents household realities.
  • It guides income adjustments, social security benefits, and helps the Reserve Bank of India frame monetary policy, including interest rate decisions.
  • When CPI accurately reflects consumption patterns, policy responses better match ground realities.
• Need for Base Year Revision
  • Since the last base year (2012), India’s economy has undergone major changes:
    • Rapid urbanisation
    • Expansion of the services sector
    • Growth of digital platforms
    • Diversification in household spending
  • To capture these shifts, India is updating the CPI base year to 2024.
• Updated Consumption Basket and Weightage
  • The CPI 2024 series is based on the Household Consumption Expenditure Survey 2023–24.
  • Key changes include:
    • Higher weight for items with increased household spending
    • Reduced weight for items with declining expenditure share
    • Inclusion of emerging trends, particularly rising service consumption
  • This ensures inflation measurement reflects actual spending behaviour.
  • The revised CPI methodology aligns more closely with international standards while retaining India-specific features. This improves global comparability without compromising domestic relevance.
• Modernised Data Collection
  • The 2024 revision upgrades data collection methods:
    • Traditional market surveys continue for essentials
    • Online price tracking introduced for telecom services, airfares, and other services
  • This modernised approach better reflects evolving consumer habits.

A Wider and More Reliable CPI Database

• Technology-Driven Data Collection
  • The new CPI series adopts computer-assisted price collection, reducing manual errors and enabling real-time validation.
  • This improves the quality and timeliness of data—crucial for decisions affecting loan rates, savings returns, and household budgets.
• Greater Use of Official and Administrative Data
  • The updated base year integrates more official data sources, including:
    • Rail fares and postal charges
    • Fuel prices
    • Public Distribution System (PDS) items
  • By combining survey data, administrative records, and digital price sources, the CPI reduces bias and enhances accuracy compared to earlier market-only surveys.
• Institutional Coordination and Expert Oversight
  • The base revision required large-scale coordination across field offices, statistical divisions, and expert bodies.
  • The Ministry of Statistics and Programme Implementation (MoSPI) consulted national and international experts to ensure methodological soundness, transparency, and clarity.
• Continuity with Improvement
  • Despite updated weights, basket composition, and data sources, the CPI retains its core objective—measuring inflation from a household perspective.
  • This continuity ensures long-term comparability while enhancing accuracy and policy relevance.

CPI in Context: Measuring Inflation Through Lived Experience

• The Consumer Price Index (CPI) reflects more than economic data—it captures the everyday realities of millions of households.
• By tracing how price changes affect daily life, it informs crucial policy decisions.
• Through the ongoing base revision, the Ministry of Statistics and Programme Implementation (MoSPI) has ensured that the CPI remains accurate, current, and comparable over time, preserving its role as a reliable mirror of India’s economic experience.