From roti to OTT: New inflation math tells story of new India
The revision of the CPI basket not only refines how inflation is measured but also indirectly shows how Indian households are spending differently compared to a decade ago. The most striking signal is a reduced emphasis on food and a greater emphasis on modern consumption categories such as services, housing and OTT. The shift from Roti to OTT reflects an economy shifting from subsistence-heavy spending to more diversified and discretionary consumption, so to speak.
Why did the CPI basket need a reset?
Measuring inflation depends on accurately reflecting what households buy and how much they spend in each category. When the structure of consumption changes, the index must develop accordingly. The previous CPI basket was based on 2011-12 spending patterns, a period before the rapid expansion of digital services, organized retail, app-based transport, streaming platforms and newer fuel formats such as CNG and PNG.
The revised series updates the base year to 2024 and includes expanded data sources, including digital and administrative records. Rural house rent is also included for the first time, strengthening the housing sample size in both rural and urban areas. Prices on e-commerce platforms are now included in the index. Items like OTT subscriptions, flight tickets and telecom plans are officially tracked. At the same time, outdated items such as VCRs, cassette players and coconut rope were removed.
These adjustments increase statistical accuracy. But they also reflect a society where digital media subscriptions coexist with traditional staples and consumption baskets increasingly reflect modern lifestyles.
Food: A structural changeThe most significant change in the revised CPI is the sharp reduction in food weight; decreased from the previous rate of roughly 46% to approximately 37%. Food remains the largest component of the CPI basket and continues to have a significant impact on headline inflation at 37%. However, the decrease in its share is economically important.
Food prices are generally volatile, affected by monsoon rains, supply disruptions and global commodity trends. A lower weighting on food could reduce headline inflation volatility and provide a softer outlook for monetary policy. But the deeper meaning is what this weight reduction represents.
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Inflation baskets are obtained from household consumption surveys. The decrease in the share of food in CPI means that households allocate a smaller portion of their total expenditures to food. This does not mean that food spending has fallen in absolute terms. On the contrary, other categories are growing faster.
This model is consistent with a well-established economic principle: As income increases, the proportion of income spent on food decreases. Even though families spend more on food, food takes up a smaller share of the total consumption pie. The revised CPI structure effectively recognizes that India is moving on this developmental trajectory.
Evidence from the Household Consumption Expenditure Survey
Household Consumption Expenditure Survey data also underlines this transformation. In rural India, the Average Monthly Consumption Expenditure (MPCE) per Capita increased from Rs 1,430 in 2011-12 to Rs 3,773 in 2022-23. In urban India, it rose from Rs 2,630 to Rs 6,459 during the same period. Household consumption has more than doubled in nominal terms over the decade.
The change in the composition of spending is equally important. The share of expenditure allocated to food in rural areas decreased from 52.9% in 2011-12 to 46.38% in 2022-23. In urban areas, the share decreased from 42.62% to 39.17%.
These figures confirm two simultaneous trends. First, consumption levels are increasing significantly. Second, the relative importance of food in household budgets is decreasing. Households spend a larger share on non-food items such as clothing, transportation, housing, health, education and entertainment.
The CPI revision aligns the measurement of inflation with this new consumption story. The basket now reflects what people actually buy, rather than what they bought a decade ago.
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The rise of services and modern consumption
The updated CPI basket includes rural housing, streaming services, digital storage devices, value-added dairy products and services such as baby care, reflecting broad-based changes in lifestyles and aspirations. The inclusion of rural house rent is particularly important as it recognizes trends in monetization and formalization in rural housing markets.
Similarly, combining online media subscriptions and digital services reflects the rapid expansion of India’s digital economy. Telecom plans, OTT platforms and air travel are no longer niche spends restricted to a small elite. Their presence in the CPI basket indicates that they now constitute meaningful components of household expenditure.
This shift towards services is characteristic of economies transitioning from low-middle income status to middle income status. As incomes increase, households go beyond basic needs and turn to spending based on comfort, convenience and experience.
Food is still important but no longer dominant
While the narrative of maturing consumption is intriguing, it is important not to exaggerate this shift. Food, which constitutes approximately 37% of the CPI basket, continues to be the determining factor of inflation. In a country with a significant rural and low-income population, food security and price stability remain key policy concerns.
Moreover, food inflation still continues to create huge psychological and political effects. Even if the weight decreases, increases in food prices will meaningfully impact headline inflation and household welfare.
What has changed is not the absolute importance of food, but its relative superiority. CPI no longer portrays India as an economy where almost half of household expenditure depends on food. Instead, it reflects a more balanced distribution across categories.
The January 2026 CPI revision underlines that India’s consumption story is both expanding and diversifying. Household expenditure has increased significantly over the last decade, and the composition of this expenditure has shifted from food to housing, services and modern goods.
CPI rejig is technical in design, but it also tells a story. It reveals how India is changing spending patterns by updating how inflation is measured.
