Food weight drops below 40%, rural share rises to 55% in new CPI series

Inflation turns more core

• Food weight in CPI drops to 36.8 percent, rural share rises to 55.4 percent
• Non-food items like housing and transport gain more weight in new CPI series
• Headline inflation expected to be less volatile due to reduced food influence

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India’s new consumer price index (CPI) series, set to be released on February 12, will mark a significant shift in how inflation is measured, with food losing prominence and rural India gaining a larger say in the overall index.

According to the report of the expert group on revising the CPI base year, the weight of food and beverages in the headline index will decline sharply to 36.8 percent from 45.9 percent in the current 2012-based series. The change reflects evolving consumption patterns, with households spending a greater share on non-food items and services as incomes rise and urbanisation deepens.

While food’s influence on headline inflation will reduce, the new series places a higher weight on rural India. The rural share in CPI is expected to rise to 55.4 percent, compared with 53.52 percent earlier. In contrast, the weight of urban India will fall to 44.6 percent from 46.48 percent. This rebalancing is based on updated consumption expenditure data and signals the continued importance of rural demand in shaping national inflation trends.

A closer look at the expenditure groups shows that several non-food categories have gained weight in the new 2024 series. Housing, water, electricity, gas and other fuels now account for 17.7 percent of the index, up from 16.9 percent earlier. Health services have also seen a marginal increase to 6.1 percent from 5.9 percent, while transport and communication have edged up to 12.4 percent from 8.6 percent earlier.

Restaurants and accommodation services account for 3.3 percent. Personal care, social protection and miscellaneous goods and services have been assigned a 5 percent share, reflecting the growing role of services in household spending.

Some traditional categories, however, have lost ground. Clothing and footwear now account for 6.4 percent of the basket, slightly lower than 6.5 percent earlier, while education services have seen a sharper drop to 3.3 percent from 4.5 percent. Recreation, sport and culture also now carry a weight of 1.5 percent.

Overall, the “miscellaneous” group—which largely captures non-food items and services—has expanded significantly, rising to 36.2 percent from 28.3 percent earlier. This structural shift is expected to make headline inflation less volatile over time, as the index becomes less sensitive to sharp swings in food prices, particularly vegetables.

For policymakers, the changes imply that future CPI readings may better reflect underlying demand conditions, even as rural price trends continue to play a dominant role in shaping India’s inflation trajectory.

The Economic Survey released on January 29 noted that inflation is likely to stay benign in the coming year, but core inflation still needed to be monitored.