Inflation likely just 20–30 bps higher under new CPI weights; food's share in CPI to fall below 40%: SBI

New series to have less emphasis on food

• SBI: New CPI weights to increase inflation by 20-30 basis points on average
• Food and beverages weight drops to 36.75 percent in new CPI series
• New CPI will cover 358 items and include more services and online price data

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India’s current inflation trajectory is unlikely to see any material jump with the new CPI weights, with the reading expected to be only 20–30 basis points higher on average, according to a report released by State Bank of India (SBI) researchers on January 29.

Analysing the recommendations of the statistics ministry’s expert group on revising the CPI base year to 2024, SBI said that applying the new expenditure weights to the existing price indices results in only a marginal increase in headline inflation.

“By considering the new weights on unchanged index, we have calculated new CPI with old indices and found that overall CPI will increase marginally by 20–30 bps. While, in the months when food inflation is higher, the new CPI will be lower by 20–30 bps,” the report noted.

A key change in the new CPI series is a sharp reduction in the weight of food and beverages to 36.75 percent from 45.86 percent in the current 2012-based series.

The combined weight of transport, information and communication, for instance, rises to 12.41 percent from 8.59 percent, while recreation and culture nearly triples to 4.86 percent.

The new CPI (2024=100) will include 358 weighted items, up from 299 earlier, and adopt the latest COICOP 2018 classification to improve global comparability. Price collection will also expand to online platforms and e-commerce markets, while services such as telecom, OTT subscriptions will be captured more systematically.

The report comes on the day the Economic Survey noted that inflation, despite having an upward trajectory, is likely to be benign this fiscal and will remain within target levels.