1 hour ago
India’s new Consumer Price Index (CPI) series is expected to provide better coverage of consumption patterns and price tracking, while upcoming gross domestic product (GDP) methodology changes are unlikely to cause sharp changes in headline growth numbers, according to Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation (MoSPI).
The government recently updated the CPI base year to 2023–24 from 2011–12. The update reflects changes in consumption patterns and includes new items while removing others. Garg said the ministry has released month-by-month inflation data for 2025 under both old and new series, along with linking factors connecting the two-index series.
He added that further details may be released after expert review. “Over the next few months, in case there are some details which are possible, we will take the advice of the expert group.”
Also Read | January inflation at 2.75%: economists flag food risks, RBI likely to stay on pause
He said higher food inflation in the new series is due to expanded market coverage and changes in food basket weights. “The number of markets has increased from around 2,300 to around 2,900 markets. So, our reach both in the urban and rural areas has increased. The eights within food items have changed… cereals have reduced, fruits, fish, meat and dairy have increased.”
He added that new items such as millets and barley have been included, which may also affect inflation readings.
Dr Garg said, “We look at price changes and not the level of the prices themselves… given the greater granularity now, it is easier to look at what items and sectors prices have changed.”
He said that rental inflation data is now based on ground-level rental tracking instead of policy-linked rent changes.
Also Read | India’s wholesale inflation rises to 10-month high in January
MoSPI said upcoming GDP calculation changes will include better data from the informal sector and wider use of double deflation in manufacturing.
Dr Garg said, “One should not expect a drastic change in numbers, either in terms of levels or growth rates, but there would be some changes.”
Below are the edited excerpts of the conversation.
Q: On CPI series, you all have given only at the headline and subgroup level connectivity. When will you give us the more granular detail of the back series because that will be needed even for policy makers and, of course, for economists and analysts?
A: Regarding the back series, as you would have noticed that for the year of 2025 for the 12 months, both the inflation numbers month to month are available, both in the old and the new series. And for the period going right up to January 2013, we have given a linking factor which links the index of the old series and the new series, so that whatever comparisons and changes - need to be done by any researcher that can be done.
Now, specifically, we have also given this at the state level and at the national level, you would realise that in the new series, a number of items have been introduced and a number of items have been dropped. It's not possible to get the prices of those and which many of them non-existent items, which may not have existed in January 2013. So what is the international norm is to give a linking factor which links the index of the two series and which is what we have given.
Further detailing as may be required, we have an expert group to look at that and in case there are certain more details required, they can have a look at it. Over the next few months, in case there are some details which are possible, we will take the advice of the expert group on that.
Q: You have given us linking factor at a headline level. However, there will be many subgroups where it will be available. After all, the addition and deletion is not huge, so by when approximately, can we get a linking factor for the other subgroups which are common?
A: You must also realise that in the earlier series we had six groups, yes, and now we have 12 divisions. Within the groups also, there have been a lot of changes of what items are included and not included. For example, in housing now you have utilities which are part of the housing and which is the international norm. We have a separate classification for restaurant and accommodation services so that prepared food moves from the food group to the division for restaurant and accommodation services and similar changes are there across other groups, divisions and in the items. So I will not be able to give you a firm date, but as I mentioned, the expert group is seized of the matter. Over the next few months, we will see what other colour that we can give, which will help researchers and forecasters.
Q: We should get it in 2026 you are saying, if any additional linking factors?
A: Yes, if at all it is feasible, it is technically possible. However, as I said, the international norm is what we have followed, and we have given whatever is internationally accepted.
Q: Now let me come to the internals and the question that I raised when I introduced the topic itself, surprisingly, food has shown much higher inflation, almost 2% points higher inflation, and the guess even for January has come in way different. Everybody gave us a nil number in our poll, and it has come in 2.1% higher inflation. What is accounting for this higher food inflation? Is it because you are looking at more districts and more places? Is that why there is a difference?
A: So a combination of factors, number one is obviously the number of markets has increased from around 2,300 to around 2,900 markets. So our reach, both in the urban and the rural areas, has increased that is number one. Number two, the weights within the food items of different items have changed. For example, cereals have considerably reduced, keeping in view the consumption patterns. Fruits have increased; fish, meat, dairy products have increased. Barley and millets, these products have entered the food basket. So, there has been a change in the items themselves.
Regarding month to month, obviously, if there are item changes, it will depend on which items have entered the basket, and if there have been changes in prices in that item, that will be reflected,
Q: Core CPI, which is, excluding food and fuel that inflation has come in way lower, almost 2% points lower. Reserve Bank looks at that very closely. That makes a seminal difference to inflation expectations going forward. Why is it so much lower?
A: So again, as I mentioned number one in housing, utilities are a part of housing, and utilities depends on what the price changes are there. Let me also just mention that we look at changes in price and not the level of the prices themselves. So let us say, even if there are high prices in certain product, but if month to month, there is no change that won't get reflected in the inflation numbers.
So given the greater granularity now that we give, it is easier for everyone to look at what items and what sectors the prices have changed. And that's where the inputs would be for policy makers that they are able to, in many cases, at the item level or at a sub sector or a sectoral level, one will know what the changes are, and therefore figure out whether it's a supply side issue, it's a demand side issue, and take appropriate policy actions.
Q: I take your point when you say that, you all are not concerned about the level of prices, but about how much they have changed year-on-year. Rental inflation at 2% looks a little out of reality, anecdotally speaking, more so because urban inflation is lower than rural housing inflation, which has come for the first time. As well the level of inflation is lower than many major cities in the world. So, it's a little surprising that rental inflation should have come in so low. Is it that the new cities you have chosen have very little inflation? What explains this very low housing inflation?
A: The basis for choosing the cities and the rural areas is entirely keeping in view the stratified sampling procedures that we use and looking at the household consumption expenditure survey (HCES), and the weights in the HCES.
Now coming specifically to the issue that you have mentioned, we take the rental data from somewhere around 16,000 data points in the urban areas and around 4000 in the rural areas. So that's the data that we have so the number of data points are huge. Where I think the difference is on anecdotal information, which is primarily might be from some of the major metropolitan terms, but given that we are representative of the country. The data points will represent the combination of the data that we receive across the country that is where the difference happens from anecdotal, individual experience and what is seen in this.
Coming on, the rural prices changing more - perhaps that in this month there have been greater changes in the rural areas than the urban areas. However, as I mentioned, that we look to ensure that the basis that we give the information is representative of the country as a whole, and that in terms of statistically robust mechanisms that we follow.
Q: That probably answers my next question, because in the new housing series, it's very stable month-on-month for 2025 whereas in the past, we have had, jumpiness when we have housing inflation. How do you explain this?
A: One of the reasons for the jumpiness was that we had included employer given household or government provided accommodation, and any change in the house rent due to a policy division would suddenly show up in the inflation, which is incorrect. So what we do in the new rental series, we ask the householder, depending on again, when is the next change going to happen and there is a panel which we keep constant for six months, and the panel of the houses change. So, we give an actual on the ground experience of changes in rental rather than rental changes being impacted due to policy changes at a corporate or at a government level.
Q: On GDP, this core and food, although at the headline level, analysts and economists are not seriously disturbed. If you had given a much higher or lower CPI number, bond markets would have been in a tizzy. The markets are very calm after the new series. You can you prepare us for the GDP, will there be any such dramatic changes within the components or the headline in when the GDP series is released?
A: Let me just tell what are the changes that we are doing in the GDP, so that you get a sense of what you can expect. Number one is the household sector, or what is commonly called the informal sector, we now have a greater granular information available because of the annual survey of unincorporated sector enterprises and because now we have the monthly data from the periodic labour force survey. Both these give us a much more detailed month-on-month, quarter-on-quarter, indication of what is happening in the informal or the household sector, so that will get reflected. We will no longer have it primarily based on indicators or proxies, which is what we were doing.
The second major change that we are doing is that we will be introducing double deflation fully in the manufacturing sector, and doing away with single deflation, even in the services sector. In the agriculture sector, in any case, we always had double deflation. So this will also remove any doubts which have been raised in the past that some of the growth has been bumped up because of deflation, which we, in any case, would not agree to that because the granularity at which we were using the inflation numbers, we had 180 inflation indices that we used to use, even in the old series. However, in any case, in the newer series, we have, now that the new CPI and the WPI is in the works, we have much more detailed information.
The third thing that we are doing is we have access to more granular information and real time information, with the availability of GST, public financial management system (PFMS) of the government, allows us to track expenditures right up to the village level, on a real time basis. So, we have much greater information at a holistic level and also at a regional allocation level, state to state allocations become so much more accurate with this data.
There are a couple of other things, but I will just mention one or two more. The discrepancies had been highlighted as one of the issues between the expenditure side and the production side of GDP estimates. With the availability of more data, we are going to be producing the supply use tables which take care of these discrepancies. I know this is a highly technical subject, but at the same time, all I want to say is that on the production side, which is based on actual production data, and the expenditure side, which is a consumption side data, the discrepancies would also be taken care of. So given the detailed data that we have, the granularity of the data we have, the robustness of the estimates would improve.
I would not be able to comment on what will be the changes in the level of the numbers, but our sense is that while there could be some changes, one should not expect drastic change in numbers, either in terms of the levels or the growth rates, but there would obviously be some changes.
Q: We were talking about the new and the old CPI series, and the fact that core CPI is lower by about one and a half percentage point. What could have accounted for this lower count because core CPI is going to be very important going forward, even for policy making?
A: Some of the issues, and if one looks at the numbers, I am sure one will get the answers that which numbers have really changed.
Q: Gold, everybody has noted that gold weightage has gone down, so that is accepted, other than that, what are the reasons?
A: Some of the new services have come in, which were not there earlier, and some new items have come in, and some products because people have started using them over the past 10 years, and I can just name a few of them. For example, there is now greater weightage for air conditioners, which is to be expected, food processors which are kitchen appliances, they have entered the items. Caretaker services, attendant, babysitter services, they have entered the basket of items, and some of the older items, like DVD recorders, CD players, etc. have got deleted. Because the representativeness of the items which are now included and what the change if any there are on some of these, that is what is impacting the core inflation numbers.
Q: Education inflation as well, that also is low, and anecdotally, municipal schools in Bombay have closed down because people are not going there. They are going to state aided schools, but not to the really free schools. As well, you can see aggressive rip off levels of education inflation at higher levels, especially in the private colleges. Why is education so low in both series, old and new?
A: I come back to the point that we represent the consumption patterns of 140 crore people, and that may not anecdotally refer to the consumption seen or lived by people in metropolitan towns. The fact remains that in government schools across the country, not only tuition fees are free, but also a lot of other services, books, uniforms are also free, and that in any case, these fee services don't form a part of household consumption expenditure. Therefore that could be one of the reasons why there seems to be an apparent low expenditure on education, when actually the educational gross enrollment rates, etc. are increasing, and that's because in the government schools, colleges, etc. a lot of it is free or subsidised. So, I think it is a question of anecdotally in certain city being different from what the lived experiences are across the country.
Q: Coming to other data that MoSPI is going to release, we know the GDP data new series comes in on February 27, isn't index of industrial production (IIP) also in the works, when is that coming out?
A: The index for industrial production in the new base, which is again, 22-23 would be released in the end of May, May 28 is the scheduled time for release of the new IIP. Apart from that, there are some other new surveys that we are doing. We are starting a new survey of the annual incorporated service sector enterprises. We have the annual survey of industries (ASI), which takes care of the incorporated or the formal manufacturing sector, and we have the annual survey of unincorporated sector enterprises (ASUSE), which takes care of the unincorporated sector, both manufacturing and services. However, we, until now, didn't have a formal survey which captured the service sector, the formal service sector, so we are filling up that data gap.
Some of the other new things that we are doing is we are bringing out a travel and tourism survey, that survey is going on. Given the importance of this sector and the growth of this sector, we are plugging that gap. In fact, that's an ongoing work that we do. We discuss with other ministries and departments, and in fact, take feedback from the market on what is the data gap that exists and if it is sufficiently important for the economy, we are happy to fill those data gaps.
Q: Anything more on labour, you are giving us a monthly employment data, but anything else on wages, employment, or on that front that we should expect?
A: The first annual report of the Periodic Labour Force Survey (PLFS) for the calendar year 2025, would be soon coming out, maybe in sometime in March. So that will give a lot more granular information. Because, as in the monthly data that we do, we give the headline numbers of worker population ratio (WPR), labour force participation rate (LFPR), female labour, both female and male and these basic unemployment rate.
In the quarterly, we give some more detail in terms of states and sectors, but in the annual, you will have a lot more detailing. I am sure you'll get a lot more data on the labour employment front in the next few weeks.
Q: There were people in the market who were worried or were just asking, how do you account for shrinkflation? Now, when prices of wheat, flour or sugar go up like they did two years ago, a typical Parle biscuit doesn't change the price. It changes the size of the pack, not the price. So how do you account for shrinkflation?
A: The item descriptions are very, very clear. When we do we look at both the volume or the weight and the price. So those adjustments are made, keeping in view that like to like comparison happens from month to month.
Catch all the latest updates from the stock market here
