The weight of food and beverages will see a notable reduction in the Consumer Price Index (CPI), 2024, potentially reducing food-led volatility in headline inflation.
Rebalancing the Basket
According to a ministry of statistics and programme implementation (MoSPI) report released on Thursday, the weight of food and beverages in the new series will be 36.7%, much below the 45.86% in the current series with 2012 as the base year. The weight of food, without beverages, in the new series will be 34.77%.
Housing, water, electricity, gas and other fuels will have 17.66% weightage in the basket, making “shelters and utilities” the second biggest item in the index.
The share of transport will be 8.79%. Clothing and footwear and health’s weight will be 6.38% and 6.1%, respectively. Personal care, social protection and miscellaneous goods and services’ weight will be 5.03%.
The revised weight of items in CPI will have implications for the gross domestic product (GDP) estimates. A new GDP series with 2022-23 as the base year will be released in late February. The National Statistical Office (NSO), in its advance estimates of GDP for the current fiscal, used a low deflator on account of low wholesale and retail inflation rates.
Gaura Sen Gupta, economist at IDFC Bank, said core inflation (clothing footwear, housing and miscellaneous) weight increases to 55% in the new series from 45% in the old one.
On the impact on headline CPI inflation due to weight changes, Sen Gupta said that the FY26 inflation would be higher by 0.5 percentage point and FY27 inflation will be higher by 0.1 percentage point.
The CPI data based on the 2024 series will be released on February 12.
Digital Integration
The MoSPI stated that the advent of technological tools, ever-increasing e-commerce trade, and disappearing rural-urban boundaries have compelled the appropriate adaptation and redesigning of the retail inflation measurement tool.
Under the new series, the number of weighted items in the basket will increase to 358 from 299 in the current series and the number of groups has been increased from six to 12. For the first time, 12 online markets are also added across 12 towns having more than 2.5 million population to capture price variations of the items on the e-commerce/online platforms, with platforms
“The price data will be collected from 1465 rural markets and 1395 urban markets across 434 towns. Among the total items, goods will increase from 259 to 314 and services from 40 to 50 items,” the report stated.
The 2024 series is mostly aligned with Classification of Individual Consumption According to Purpose (COICOP) 2018 with 12 divisions, 43 groups, 92 classes and 162 subclasses. “To ensure mapping of Household Consumption Expenditure Survey 2023-24 items as per COICOP 2018 classification system, some adjustments have been made by suitably modifying the names of the items. The mapping will ensure the comparability of India’s CPI with the CPIs across the world,” the report said.