Chief Economic Advisor V Anantha Nageswaran on Thursday said the new CPI series will improve the quality of data used in formulating monetary and fiscal policies. The National Statistics Office (NSO) under the Ministry of Statistics & Programme Implementation (MoSPI) on Thursday released the new Consumer Price Index (CPI) with Base 2024=100.
The new series has captured more goods and services items, and excluded those which are not consumed presently. Weights of different item groups have been recalibrated based on the Household Consumption Expenditure Survey (HCES) 2023-24.
“Since the CPI basket is now aligned with recent expenditure data, the inflation signals derived from this will be more closely matched with the economic conditions. This improves the information basis for calibrating monetary and fiscal policy,” Nageswaran told reporters at a press conference on the new CPI series.
He said that the new series with wider coverage of services and digital markets provides policymakers with a more up-to-date basis for assessing real incomes, consumption trends and purchasing power. The Reserve Bank of India (RBI) factors in the retail inflation while arriving at its bi-monthly monetary policy decision.
He said if CPI volatility declines, fiscal expenditure, DA fixation and index bonds, which are linked to CPI, would become more stable, predictable and reliable. The CEA said the proportion of weights assigned to the food basket has come down from 45.86 in CPI 2012 to 36.75 in the new series. It also reflects the reallocation of certain items to other categories, like restaurants and services.
“At the macro level, this reflects a progressive diversification of expenditure towards health, education, mobility and connectivity, which is what you would expect to see from an economy which is seeing rising incomes and rising living standards,” Nageswaran said.
He pointed out that lower weightage for the otherwise volatile group of food and beverages may make the headline inflation also less volatile.
Such rebalancing, he said, is typically associated with income growth, productivity gains and improving living standards. The revised basket also highlights the increasing role of services in consumption, he added.
“This brings consumption measurement closer to the evolving structure of output and employment, where services account for a rising share of economic activity,” he said. The new series also recognises the growing role of digital channels in price formation and would help in better distinguishing urban and rural dynamics of inflation at the state level, and the subclass as well as item level, Nageswaran said.
He said if CPI volatility declines, fiscal expenditure, DA fixation and index bonds, which are linked to CPI, would become more stable, predictable and reliable. The new CPI series and upcoming GDP and IIP with a new base year will align Indian data with the best in the world, he said.
2.75 pc retail inflation in Jan under new series
Retail inflation stood at 2.75 per cent in January under the new series of All India Consumer Price Index (CPI) with 2024 as the base year. The new series has increased the number of goods from 259 to 308 and services from 40 to 50 to provide a better picture of the price situation. The food inflation for January has worked out to be 2.13 per cent.
The key enhancements in the new series include rural house rent, online media services and fuels (CNG/PNG). For improved coverage of data available on digital and administrative sources, telephone charges, rail fare, air fare, fuel, postal charges and online media and streaming services (OTT subscriptions), too have been factored into the new series.
Also read: Jan inflation data based on new CPI series on Feb 12
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