From Netflix, JioHotstar rates to air purifier prices – CPI inflation goes modern

“For each platform, two price quotations (if available) corresponding to the base subscription plans with a validity of one month shall be collected; where a one-month plan is not available, the nearest available subscription plan shall be considered for price collection,” the report said.

With streaming subscription rates largely uniform across the entire country, a single all-India index will be compiled and applied uniformly across all states.

The modernisation of CPI inflation, India’s most important macroeconomic indicator, is part of a larger overhaul of India’s official statistics by the Ministry of Statistics and Programme Implementation (MoSPI). Based on the consumption patterns results of the 2023-24 Household Consumption Expenditure Survey (HCES), the new CPI inflation series with 2024 as the base year for prices will see its first print – for January – be released on February 12. After that, on February 27, the new GDP series – with 2022-23 as the base year and sweeping methodological changes – will be released on February 27 starting with data for October-December 2025 and the second advance estimate for 2025-26. Then, in May, the revised Index of Industrial Production will be released, also with a new base year of 2022-23.

A bigger basket

The new CPI basket will contain 358 goods and services, up from 299 currently, which is based on the 2011-12 consumer expenditure survey.

Some of the other new goods and services whose prices will be used to calculate India’s retail inflation – which fell to a record low of 0.25% in October but has since picked up to 1.33% in December – include piped natural gas, induction tops, decorative lights, paintings, nebulisers, massagers, tablets, pen-drives and external hard disks, pets and pet products, hair colour, and babysitters.

As reported by The Indian Express on Thursday, the new CPI basket is, on the whole, more services heavy than the 2011-12 one, with the weight of food and beverages dropping from 45.86% to 36.75%. This is in line with Engel’s Law, named after German statistician and economist Ernst Engel, which states that as the income of a household rises, the proportion it spends on food reduces.

“We judge that the weighting of services will increase under the new series, consistent with the shift in household consumption,” Nomura economists Sonal Varma and Aurodeep Nandi said in a note on Friday.

Apart from the addition of new goods and services, some items that have become obsolete have been excluded from the new CPI basket, such as audio and video cassettes, tape recorders, and VCDs.

The presence of these outdated items and the absence of goods and services that are commonly bought has been a long-standing concern among policymakers, especially since the Reserve Bank of India (RBI) officially adopted flexible inflation targeting in 2016. Writing in a paper in September 2022, Ashima Goyal – then one of the three external members on the RBI’s Monetary Policy Committee – had said the CPI needed wholesale changes, ranging from the weight of items contained in the basket to the number and quality of goods.

“A lower food weighting and a higher share of sticky services should dampen the volatility of the CPI series, and lead to less of a divergence between headline and core. It should also make the RBI’s inflation targeting mandate easier, as large food price shocks have historically led to inflation undershooting/overshooting its target band,” Varma and Nandi of Nomura added.