The revision comes amid scrutiny of RBI’s inflation forecasting model after it consistently overestimated price pressures last year, which could potentially contribute to an aggressive policy stance. | Photo credit: FRANCIS MASCARENHAS
The Ministry of Statistics and Program Implementation’s new consumer price index, expected at 4pm on Thursday, will reflect changes in spending patterns since the last revision was carried out more than a decade ago. The data release will include figures for 2025 based on the index weights, making comparisons easier.
The weighting of volatile items such as food has been reduced to around 36.8 percent, compared to almost half previously, and new spending categories have been added, such as rural housing rents and online shopping. The base year has also been changed from 2012 to 2024.
The changes could lift inflation to around 2.77 percent in January, according to the average estimate of 32 economists in a Bloomberg questionnaire. Inflation was 1.33 percent in December based on the previous CPI series.
While inflation remains well below the Reserve Bank of India’s 4 percent target, the new figures could prompt the central bank to postpone further rate cuts and push bond yields higher. Last week, Governor Sanjay Malhotra left interest rates unchanged and indicated there would be a longer pause.
The revision comes amid an investigation into the central bank’s inflation forecast model after it consistently overestimated price pressures last year, which could potentially contribute to an aggressive policy stance. Officials have also debated whether the central bank should focus on an inflation measure that excludes food, because the high weighting creates more volatility in the overall figures.
The new suite will help the RBI “make its monetary policy measures much more effective and their transmission faster,” said Amol Agrawal, who teaches economics at the National Institute of Securities Markets. “It minimizes, if not eliminates, policy errors that the central bank occasionally suffers from among the older series.”
The revision is being closely watched by financial market participants as it could change expectations for interest rates at a time when foreign flows are highly sensitive to policy signals. A higher inflation trajectory could keep borrowing costs high, which could impact bond yields, stock valuations and both portfolio and foreign direct investment decisions over the longer term.
Saurabh Garg, Secretary, Ministry of Statistics and Program Implementation, said on Wednesday that the revised CPI will better reflect India’s economic realities after a rapid increase in consumer spending over the years. Rising incomes mean Indians are spending less on food and more on services and housing.
The weight of core inflation, excluding food and fuel, will rise to almost 58 percent in the new CPI series from 47.3 percent previously, according to calculations by DBS Group Holdings Ltd. Core inflation tends to be more responsive to monetary policy measures.
The government will also release gross domestic product data on February 27, based on new consumer spending patterns, which analysts say could see a sharp revision higher in the size of the economy. That could put India on track to overtake Japan as the world’s fourth-largest economy.
Horse and carriage rates
The revision of the CPI means that prices for outdated items such as videocassette recorders, radios and horse-drawn cart fares will make way for airline tickets, online subscriptions and e-commerce sales. The index will now include electricity prices, housing costs in rural areas and standardized standards for gold and silver jewellery.
Free food items distributed under government welfare programs are excluded. The government also plans to publish more detailed CPI data, possibly down to item level, with input from states and sectors.
The new CPI series comes as the bond market grapples with a record supply of federal and state government debt. Yields on 10-year benchmark bonds rose to their highest level in more than a year last week after the central bank maintained interest rates and announced no further bond purchase plans.
“The market expects a slight upward trend in the new CPI of around 30-50 basis points in the near term,” said Suyash Choudhary, chief investment officer for fixed income at Bandhan AMC Ltd. “Overall, the RBI is expected to remain in place for a long time, with an emphasis on proactive liquidity management.”
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Published on February 12, 2026
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