Inflation basket rejig: AirPods gain weight, food portion cut
In the new series, the weight of food and beverages will decrease from 45.86% to 36.75%, in line with expectations that food expenditures will decrease as per capita income increases. The weight of transportation and communication, housing, public services and personal care materials will increase.
A lower weighting on food is expected to reduce volatility in headline inflation, economists said. “Given the sensitivity of food prices to sharp fluctuations, headline inflation volatility is also likely to decline as the share of food and beverages declines sharply,” said Dipti Deshpande, chief economist at Crisil.
Of the 9.1 percentage point decrease in the total weight of food, 3.3 percentage points resulted from the reclassification of restaurant services into a separate category. It was previously located under ‘cooked meals/snacks’ in the food cart.
Paras Jasrai, deputy director of India Ratings & Research, said the decreasing share of food and beverages in the index would mean inflation would become “more in line with the stance and directions of monetary policy” as food is highly volatile and uncertain.
‘Inflation Volatility is Likely to Decrease’
This revision is intended to improve the accuracy of inflation measurement and improve the Reserve Bank of India’s monetary policy decisions.
January CPI data, which is planned to be announced on February 12, will be created according to the new series. In the new series, the weight of food and beverages will decrease from 45.86% to 36.75%, in line with expectations that food expenditures will decrease as per capita income increases. The weight of transportation and communication, housing, public services and personal care materials will increase.
A lower weighting on food is expected to reduce volatility in headline inflation, economists said.
“Given the sensitivity of food prices to sharp fluctuations, headline inflation volatility is also likely to decline as the share of food and beverages declines sharply,” said Dipti Deshpande, chief economist at Crisil.
Of the 9.1 percentage point decrease in the total weight of food, 3.3 percentage points resulted from the reclassification of restaurant services into a separate category. It was previously located under ‘cooked meals/snacks’ in the food cart.
Paras Jasrai, deputy director of India Ratings & Research, said the decreasing share of food and beverages in the index would mean inflation would become “more in line with the stance and directions of monetary policy” as food is highly volatile and uncertain.
While rural India’s share in CPI increased from 53.52% to 55.4%, the weight of urban areas also decreased from 46.48% to 44.6%.
“Rural areas are becoming an increasingly important driver of overall consumption demand, driven by strong growth in rural economies and income. This shift reflects the changing demand structure in the economy,” said Rajani Sinha, chief economist at CareEdge Ratings.
IMPACT ASSESSMENT
Economists estimate that applying new weights to the existing index could lead to a 20-40 basis point (0.2-0.4 percentage point) increase in inflation.
Retail inflation was 1.3% in December and will average 1.7% in the first nine months of fiscal 2026.
