Context and Significance
- Inflation is a key macroeconomic indicator affecting everyday household expenditures.
- Consumer Price Index (CPI) measures price changes in regularly consumed goods and services.
- It reflects costs of food, housing, fuel, and essentials in daily life.
- CPI acts as a mirror of household consumption realities.
Policy and Economic Relevance
- CPI guides income revisions and social security adjustments.
- It is the primary inflation indicator for the Reserve Bank of India.
- Influences decisions on interest rates and inflation management.
- Accurate CPI ensures policy responsiveness to real price pressures.
Need for Base Revision
- CPI base updated from 2012 to 2024.
- Economy witnessed urbanisation, service expansion, and digital consumption growth.
- Household spending patterns diversified significantly.
- Revision ensures index reflects current consumption behaviour.
Updated Consumption Basket and Weights
- Based on Household Consumption Expenditure Survey 2023–24.
- Items with higher spending received greater weightage.
- Lower-spend items assigned reduced importance.
- Basket reflects rising demand for services and lifestyle consumption.
Methodological Improvements
- Revised CPI aligned with international statistical standards.
- Retains India-specific features for domestic relevance.
- Enhances global comparability of inflation data.
Data Collection Reforms
- Introduced tracking of online prices like telecom services and airfares.
- Traditional market surveys continue for essential commodities.
- Reflects changing digital purchasing behaviour.
Technology Integration
- Adopted computer-assisted price collection systems.
- Enables real-time validation and reduces manual errors.
- Improves timeliness and reliability of price data.
Wider Administrative Data Use
- Increased reliance on official government datasets.
- Includes rail fares, postal charges, fuel, and PDS prices.
- Reduces survey bias and enhances precision.
Institutional and Consultative Process
- Exercise involved field offices, statistical divisions, and expert bodies.
- Included consultation with economists and international organisations.
- Ensured methodological transparency and robustness.
Continuity and Core Purpose
- CPI continues capturing household-level price experiences.
- Maintains comparability across time despite revisions.
- Remains a reliable guide for inflation-sensitive policymaking.
Conclusion:
- CPI base revision strengthens accuracy, relevance, and policy usefulness.
- It ensures inflation measurement reflects lived realities of citizens.