Adjusting the inflatable basket: AirPods gain weight, food portions decrease

New Delhi: AirPods, hand sanitizers, OTT subscriptions, air purifiers, e-commerce purchases, international flights and rural housing are being added to India’s Consumer Price Index (CPI) as the inflation basket changes to reflect changing consumption patterns and help measure price pressures more effectively. Apart from the recasting of the basket, the exercise by the Department of Statistics also includes updating the base year of the CPI to 2024 from 2012 and changing the weights of items tracked under the 2023-24 Household Consumption Expenditure Survey. The aim of the revision is to improve the accuracy of inflation measurement and improve RBI’s monetary policy decisions. CPI data for January due on February 12 will be based on the new series.

Under the new line, food and beverages will carry a weight of 36.75%, down from 45.86%, in line with expectations that food spending will decline as per capita incomes rise. The weight of transport and communications, housing and services and personal care items will increase.

The lower weight of food is expected to reduce the volatility of headline inflation, economists said. “With the share of food and beverages falling sharply, the volatility of headline inflation is likely to ease, given the susceptibility of food prices to swings,” said Dipti Deshpande, chief economist at Crisil.

Of the decrease in the total weight of food by 9.1 percentage points, 3.3 percentage points are due to the reassignment of restaurant services to a separate category. It was previously included under “cooked meals/snacks” in the food basket.

The lower share of food and beverages in the index will make inflation “more in line with the stance and directions of monetary policy” as food is highly volatile and uncertain, said Paras Jasrai, associate director at India Ratings & Research.

“Inflation Volatility Likely to Reduce”
The aim of the revision is to improve the accuracy of inflation measurement and improve monetary policy decisions by the Reserve Bank of India.

CPI data for January due on February 12 will be based on the new series. Under the new line, food and beverages will carry a weight of 36.75%, down from 45.86%, in line with expectations that food spending falls as per capita income rises. The weight of transport and communications, housing and services and personal care items will increase.

The lower weight of food is expected to reduce the volatility of headline inflation, economists said.

“With the share of food and beverages falling sharply, the volatility of headline inflation is likely to ease, given the susceptibility of food prices to swings,” said Dipti Deshpande, chief economist at Crisil.

Of the decrease in the total weight of food by 9.1 percentage points, 3.3 percentage points are due to the reassignment of restaurant services to a separate category. It was previously included under “cooked meals/snacks” in the food basket.

The lower share of food and beverages in the index will make inflation “more in line with the stance and directions of monetary policy” as food is highly volatile and uncertain, said Paras Jasrai, associate director at India Ratings & Research.

Rural India’s share of the CPI rose to 55.4% from 53.52%, while the weight of urban areas fell to 44.6% from 46.48%.

“Rural areas are increasingly becoming a key driver of overall consumer demand, supported by strong growth in rural economies and incomes. This shift reflects the changing demand structure of the economy,” said CareEdge Ratings Chief Economist Rajani Sinha.

IMPACT ASSESSMENT
Economists estimate that applying the new weights to the existing index could increase inflation by 20-40 basis points (0.2-0.4 percentage points).

Retail inflation was 1.3% in December and averaged 1.7% in the first nine months of fiscal 2026.