New Consumer Price Index Base Year 2024 Reflects Shifting Indian Consumption Patterns
India has updated its inflation index (CPI) with a new base year of 2024 to better reflect modern household spending. The revised basket re-organizes items into 12 distinct categories based on the COICOP 2018 classification. A significant shift is observed: the weight of food has declined, while housing and services (education, health, transport) now account for a larger share. This update, informed by the Household Consumption Expenditure Survey (HCES), allows the Reserve Bank of India (RBI) to more accurately distinguish between transitory food price shocks and persistent service-sector inflation, which is crucial for setting effective interest rates.
Key Points
- The base year for CPI has been shifted from 2012 to 2024 to capture current consumption trends.
- The new index uses the Classification of Individual Consumption According to Purpose (COICOP) 2018 standards.
- Data shows that as incomes rise, the proportion of spending on food decreases while spending on services increases.
- States like Telangana and Kerala show higher inflation under the new base due to rising costs in the service sector.
Exam Facts
- The new CPI base year is 2024, replacing the previous 2012 base.
- The index is based on the Household Consumption Expenditure Survey (HCES) data.
- The basket is categorized into 12 divisions following COICOP 2018 standards.
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