India’s January Retail Inflation Recorded at 2.75% Under New CPI Base

India’s retail inflation, measured by the Consumer Price Index (CPI), stood at 2.75% year-on-year in January, marking the first official inflation reading under the revised 2024 base year series, the government said on Thursday.

The latest reading is well below the Reserve Bank of India’s medium-term target of 4% and remains comfortably within the central bank’s 2–6% tolerance band.

How The New CPI Series Differs? 

The January data is the first release following the rebasing of CPI from 2012 to 2024, a change intended to reflect shifts in household consumption over the last decade.

Under the revised series:

• The CPI basket has been expanded to more than 350 items, compared with 299 items earlier
• Price data is now collected from around 2,860 markets, including 1,460 rural and 1,400 urban centres
• The number of price quotations tracked each month has increased significantly to improve coverage

One of the most important structural changes is the reduction in the weight of food and beverages, which accounted for nearly 46% of the CPI under the old series. In the new index, food carries a weight of about 37%, reflecting lower relative household spending on food and higher spending on services.

Inflation Components In January 

Initial disaggregated data under the new base year showed:

• Food inflation remained subdued, rising a little over 2% year-on-year, aided by lower prices of cereals and vegetables
• Fuel and light inflation stayed muted due to stable domestic fuel prices
• Housing inflation remained close to 2%, with limited monthly movement
• Core inflation (excluding food and fuel) remained contained, thus reflecting moderate price pressure across services such as education, health, and transport

The alignment of price pressures across categories contributed to the low headline reading.

Rural and Urban Inflation Trends

Rural and urban inflation readings were closely aligned, hence indicating broad-based price stability:

• Rural CPI inflation was recorded slightly below the headline figure
• Urban CPI inflation came in marginally higher but remained under 3%

This narrow gap suggests that price pressures were evenly distributed across regions rather than driven by isolated pockets.

Comparison With Previous Inflation Levels 

Under the old CPI series, retail inflation averaged above 5% during several months of 2023 and early 2024, driven largely by food price shocks. January’s 2.75% print under the new base reflects both a period of softer price momentum and structural changes in CPI weights that reduce volatility from food prices. However, the government has cautioned that direct comparisons with earlier CPI readings should be made carefully, given the change in base year and basket composition.

The January print provides policymakers with a baseline reference point for tracking inflation under the revised framework. The RBI is expected to assess incoming data over the next few months before concluding trend inflation, as base effects stabilise under the new series.

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