Relevance: GS III (Indian Economy – Inflation & Indicators) | Source: MoSPI / The Hindu

1. The Context: A Modern Update

The Ministry of Statistics and Programme Implementation (MoSPI) has unveiled a new series of the Consumer Price Index (CPI) to better reflect modern spending habits.

  • New Base Year: Updated to 2024 (previously 2012).
  • Current Status: Under this new series, retail inflation for January 2026 stands at 2.75%.

2. Key Changes in the Basket

The new series aligns inflation data with the findings of the Household Consumption Expenditure Survey (HCES) 2023-24.

  • Weightage Shift (Crucial): The weightage of Food & Beverages has been significantly reduced to 36.75% (down from 45.86% in the old series).
    • Why? As incomes rise, people spend a smaller proportion of their income on basic food, allowing for more spending on services and durables.
  • Expanded Basket: The total number of items tracked has increased to 358 (from 299). This includes more goods (308) and services (50).
  • Digital Inclusion: For the first time, prices are being collected from 12 online platforms, acknowledging the boom in e-commerce and digital consumption.

3. Why does this matter?

  • Reduced Volatility: Food prices (vegetables/monsoon-dependent crops) are highly volatile. Reducing their weight (from ~46% to ~37%) will make the headline inflation figure less volatile and more stable.
  • Better Policy Making: The Reserve Bank of India (RBI), which targets CPI (4% +/- 2%), will now have a metric that reflects structural inflation rather than just temporary food price shocks.

UPSC Value Box

Concept / TermRelevance for Prelims
Engel’s LawAn economic theory stating that as a household’s income increases, the percentage of income spent on food decreases (even if the absolute amount spent on food rises). The new CPI weights validate this law for India.
Base EffectThe impact of the corresponding period in the previous year on current inflation figures. A high base year makes current inflation look lower, and vice versa.
MoSPIThe nodal ministry responsible for releasing the CPI (through the NSO) and the Index of Industrial Production (IIP).

Q. With reference to the new Consumer Price Index (CPI) series with Base Year 2024, consider the following statements:

  1. The weightage assigned to the “Food and Beverages” group has increased compared to the previous 2012 series.
  2. For the first time, data collected from online platforms has been included in the index compilation.
  3. The index is released by the Office of the Economic Adviser, Ministry of Commerce and Industry.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

Correct Answer: (b)

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