Speaking on the release of the updated CPI, Nageswaran said the revised series reflects the evolving consumption patterns of Indian households, as rising incomes and improving living standards gradually shift spending towards services.
“Services now account for a rising share of economic activity,” he noted, adding that the rebalancing in the index weights aligns with structural changes underway in the economy.
The new CPI series updates the weightage of different goods and services in the inflation basket to mirror current consumption trends more closely. According to the CEA, this recalibration is expected to make headline inflation less volatile over time, particularly as services inflation tends to move more steadily compared to food and fuel prices.
He added that a more stable inflation print could allow monetary policy to focus more sharply on aggregate demand conditions and core inflation, rather than reacting disproportionately to temporary price shocks. However, the Ministry of Statistics and Programme Implementation (MoSPI) Secretary clarified that the government will be very careful not to formally define core inflation, leaving it to the Reserve Bank of India (RBI) to retain the flexibility to interpret and assess core inflation as it deems appropriate.
The updated series also improves the way housing costs are measured, addressing concerns of an urban bias in earlier estimates and ensuring that rental and housing-related expenses are captured more accurately across regions.
Nageswaran said India is likely to be “one step ahead of others” in compiling key economic indicators, with the new CPI reinforcing institutional capability and statistical credibility.
The government expects the revised framework to improve budget predictability as well, since more representative inflation data can help in better estimating subsidy outlays, revenue assumptions and expenditure projections.
The January inflation print, released alongside the new series, marks the first reading under the updated methodology, offering policymakers and markets a clearer picture of underlying price trends in a changing economy.
