3 hours ago
Items that have fluctuating prices, such as food and fuel, have lower weight in the consumer price index (CPI) in the new 2024 series compared to the two previous base years, lending more weight to core inflation.
Food's weight in the CPI declined by nearly 8 percentage points — from 42.71 per cent in 2010 to 34.78 per cent in 2024. In the 2012 series, it was 39.06 per cent.
Similarly, fuel and light have lower weight by 4 percentage points from 2010 to 2024.
“The decline in weight reflects changes in consumption patterns over time. As incomes rise, people tend to diversify their consumption basket. With higher income, consumers spend relatively less on essential items like food,” former chief statistician Pronab Sen told Business Standard.
This implies that core inflation, which excludes food and fuel items, would influence the overall rate of retail price changes more in the new series than in the previous ones in a broader sense.
Many experts believe that core inflation is a true indicator of the inflation trajectory in the economy and that the Reserve Bank of India's monetary policy should be based on that segment.
Weights of the miscellaneous category — covering services such as transport, healthcare, education and communication — increased by nearly 7 percentage points, from 26.31 per cent in 2010 to 33.15 per cent in 2024, marginally less than food items.
The distribution of weights between rural and urban areas has shifted towards the latter in the new series.
The rural areas' weight dropped by nearly 3 percentage points — from 58.07 per cent in 2010 to 55.42 per cent in 2024 — while urban areas gained proportionally, rising from 41.93 per cent to 44.58 per cent during the same period. Weights of rural areas stood at 57.36 per cent and those of urban areas at 42.64 per cent in the 2012 series.
This rebalancing reflects India's rapid urbanisation and the faster growth of urban consumption relative to rural areas.
Sen explained, “The rural and urban weights are determined by their respective shares in total consumption. If the urban population increases due to migration, or if urban consumption grows faster than rural consumption, then the urban weight in CPI will increase, while the rural weight will decline accordingly.”
For the first time, the housing segment includes rural areas as well.
