India is set to release inflation data based on a revamped Consumer Price Index (CPI), a move that could reinforce the Reserve Bank of India’s decision to keep interest rates on hold. The new CPI series, with 2024 as the base year, reflects updated consumption patterns and revised weightages, potentially pushing January inflation to around 2.77%, compared with 1.33% under the old series in December.
The revised index reduces the weight of food items to 36.8% from nearly half earlier, while increasing the share of core inflation components to about 58%. It also incorporates new categories such as rural housing rentals, e-commerce spending, airfares and online subscriptions, while excluding free food distributed under welfare schemes.
Although inflation remains below the RBI’s 4% target, analysts say the higher reading and methodological changes may justify a prolonged policy pause. Governor Sanjay Malhotra recently kept the benchmark rate unchanged, signaling caution amid global and domestic uncertainties.
Market participants are closely watching the overhaul, as it may influence bond yields, liquidity conditions and foreign investment flows. Economists believe the updated index will better capture India’s evolving consumption trends and could improve the effectiveness of monetary policy transmission going forward.
New CPI Series May Prompt RBI to Extend Rate Pause Amid Higher Inflation Print
