India’s inflation data will now look different. For the first time in over a decade, retail inflation will be calculated using a revised Consumer Price Index (CPI) with 2024 as the new base year instead of 2012.
This change is more than just a technical update. It reshapes how inflation is measured and what influences the final number — with direct implications for interest rates, loan EMIs and savings returns.
The CPI works like a large “shopping basket” that tracks the prices of goods and services commonly purchased by households. Until now, the index was based on consumption patterns from 2012. That framework was introduced in 2015.
But India in 2024 is very different from India in 2012. Online shopping, digital subscriptions, app-based services and evolving urban lifestyles have significantly altered spending patterns. The new CPI aims to better reflect how households actually spend today.
Under the previous CPI structure, food accounted for nearly 46% of the total basket. That meant sharp changes in vegetable, cereal or milk prices could heavily sway the overall inflation number.
In the revised series, food’s weight has been reduced to roughly 37%.
This does not mean food prices are unimportant. They remain the single largest component. However, sudden spikes in items like tomatoes or onions may no longer cause inflation to jump as sharply as before.
At the same time, housing and services now carry relatively greater weight in the new basket.
Housing includes rent and related costs, while services cover healthcare, education, transportation and other household services.
For urban households — especially those spending a large share of income on rent, school fees or medical expenses — the new inflation number may better reflect real cost-of-living pressures.
In simple terms, what you eat will matter slightly less in the calculation. Where you live and how you spend will matter more.
The CPI basket has also been broadened. The number of items tracked has increased from around 299 to approximately 358. The number of broad groups has doubled from six to twelve.
The revised weights are based on the latest Household Consumption Expenditure Survey, which captures current spending behaviour across rural and urban India.
This statistical reset ensures inflation measurement aligns with modern consumption trends rather than outdated patterns.
Inflation is not just an economic statistic. The Reserve Bank of India (RBI) relies on CPI data to set monetary policy. The central bank’s inflation target is 4%, with a tolerance band of plus or minus 2 percentage points.
If inflation appears lower under the new calculation, it could support the case for interest rate cuts. If higher, rate cuts could be delayed.
Interest rates influence home loan EMIs, personal loan costs, credit card interest and fixed deposit returns. In short, inflation numbers shape everyday financial decisions.
This is not a crisis — it is a recalibration. India has updated its inflation formula to reflect how people live and spend in 2024.
Food prices will continue to matter, but housing, services and modern consumption patterns will now play a larger role.
From now on, when inflation rises or falls, remember: the number reflects a new balance — one that depends a little less on what is on your plate and a little more on where and how you live.
