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India Revises Inflation Calculation, Reducing Food's Weight

  //food-wine.news-articles.net/content/2026/01/31 .. nflation-calculation-reducing-food-s-weight.html
  Published in Food and Wine on Saturday, January 31st 2026 at 10:05 GMT by The New Indian Express
      Locale: N/A, INDIA

New Delhi, January 31st, 2026 - A fundamental shift in how India measures inflation is underway. The National Statistical Office (NSO) has officially implemented a revised methodology for calculating the Consumer Price Index (CPI), significantly altering the weight assigned to food within the inflation basket. This recalibration, rooted in data from the latest Household Consumption Expenditure Survey (HCES), signals a recognition that Indian consumer spending habits are evolving, and the traditional CPI may have been overstating the impact of food price increases on overall household budgets.

For decades, food constituted a disproportionately large segment of the CPI, often exceeding 50%. This weighting reflected historical consumption patterns in India, where a larger percentage of household income was dedicated to food purchases. However, as India's economy has grown and incomes have risen, consumers have diversified their spending, allocating a greater share to non-food items such as transportation, healthcare, education, recreation, and durable goods. The new methodology acknowledges this reality, reducing the prominence of food in the CPI calculation and increasing the weights assigned to these other essential categories.

The HCES data, which provides a detailed snapshot of household expenditure across the country, served as the cornerstone of this revision. The survey revealed a clear trend: while food remains a vital component of the Indian household budget, its proportional share has been steadily declining. This decline is particularly noticeable in urban areas, where disposable incomes are generally higher and consumers have greater access to a wider range of goods and services. Consequently, the NSO has determined that a CPI basket heavily weighted towards food no longer accurately reflects the lived economic experience of a significant portion of the Indian population.

Economists are largely in agreement that this revision will likely result in lower reported inflation rates, especially in light of the recent volatility in food prices. India has experienced periods of significant food price inflation in recent years, driven by factors like climate change, supply chain disruptions, and global commodity price fluctuations. Because food carried such a significant weight in the CPI, these price increases had a magnified impact on the overall inflation figure. Reducing food's weight essentially dampens this effect, offering a more nuanced and, proponents argue, accurate representation of the cost of living.

However, the change isn't without its critics. Some argue that lowering the weight of food could mask genuine inflationary pressures affecting vulnerable sections of society, particularly those with limited income who continue to spend a large proportion of their earnings on food. Concerns have been raised that this could lead to policy decisions that don't adequately address the needs of low-income households. The government has countered this by emphasizing that the CPI is just one indicator used for policymaking, and that other data sources, including rural wage rates and poverty levels, are also carefully monitored.

Importantly, the revision is not being applied retroactively. This means historical CPI data will remain unchanged, allowing for consistent time-series analysis. The new methodology will be used for future CPI calculations, providing a fresh baseline for tracking inflation from this point forward. This decision prevents disruption to economic modeling reliant on past data, while simultaneously promising a more accurate gauge of future inflationary trends.

The implications of this change extend beyond simply reporting lower inflation numbers. It could influence monetary policy decisions made by the Reserve Bank of India (RBI), potentially leading to a more accommodative stance if inflation appears contained. It also impacts indexation of wages and pensions, as these are often linked to the CPI. While the government has stated it will carefully consider the impact on various segments of the population, adjustments may be needed to ensure fair and equitable outcomes.

The move by the NSO reflects a broader global trend towards refining inflation measurement methodologies. Many countries are grappling with the challenge of accurately capturing consumer spending patterns in a rapidly changing economic landscape. India's decision to recalibrate its CPI basket represents a proactive step towards ensuring that its inflation indicators remain relevant and reliable, providing policymakers and citizens alike with a clearer understanding of the economic realities facing the nation.