The CPI base revision exercise measures a slice of life Premium

Through the ongoing base revision exercise, the Ministry of Statistics and Programme Implementation has ensured that the Consumer Price Index continues to be accurate

Inflation, one of the most closely watched macroeconomic indicators, is something that most people feel in daily life in their routine household expenses. The Consumer Price Index (CPI) captures this reality by tracking the prices of goods and services that households regularly consume, turning everyday experiences into an official measure of inflation. For the common man, the CPI is like a quiet mirror of daily life capturing, inter alia, the changing cost of basic needs such as food on the plate, rent for the roof over the head, and fuel for the journey to work.

Though it appears as a simple number, it speaks for households, guiding income and social security adjustments so that life’s essentials remain within reach. CPI-based inflation is also the primary indicator for the Reserve Bank of India to help guide it in decisions such as interest rates and inflation control. Therefore, when the CPI reflects reality, policies respond better to what people are truly experiencing.

Inflation is not just about prices going up. It is about how these price changes affect household budgets. That is why making sure that the index reflects current consumption patterns is just as important as tracking the prices themselves. This is the context in which India’s ongoing CPI base updation from the year 2012 to 2024 must be seen.

Since the last base revision, the economy has changed significantly, urbanisation has grown, services have expanded, digital platforms have changed buying habits, and household spending has diversified.

The CPI 2024 series has, therefore, been updated using the latest Household Consumption Expenditure Survey of 2023-24. As people’s preferences and expenses changed over time, the importance (weightage) given to different goods and services in the CPI has also been adjusted.

Items on which households now spend more have been given greater weight, with less weight for those that account for a smaller share of spending. This ensures that the CPI measures price changes that really affect household budgets. The consumption basket has also been updated to reflect emerging trends, such as growing spending on services, driven by rising incomes and changing lifestyles.