CPI Base Year Updated: Will Loans Get Cheaper or Salaries Rise? Key Government Changes Explained

CPI Base Year: Statistics or data play a very important role in understanding the economic situation of the country and in determining the right policies. The Indian government has recently initiated a groundbreaking change in the country’s economy. To give an accurate picture of the spending and cost of living of the common man, the ‘base year’ or base year for measuring Consumer Price Index (CPI) or retail inflation has been changed. Till now, inflation was calculated based on the year 2012, which has now been changed to 2024. Under this new rule, the retail inflation rate in January 2026 stood at 2.75 percent.

Why is this change necessary?

The lifestyle of Indians has changed radically in the last decade. What was the spending pattern of people in 2012, has completely changed by 2024.

Evolution of lifestyle: In 2012, food delivery apps like Swiggy, Zomato or OTT platforms like Netflix were practically non-existent. But these services now cover a large part of the middle class’s expenses.
Limitations of old data: The use of old base years did not reflect the true picture of the economy. Lack of accurate data also made it difficult for the government to formulate public welfare policies.

What are the changes in the basket of goods?

The government uses a ‘basket’ of certain goods and services to measure inflation. The new rules have brought major changes to this basket. Government equipment

Increase in the number of goods: Earlier, where 299 goods and services were tracked, now the number has been increased to 358. This will make the calculation of inflation more accurate.
Decrease in importance of food: As people’s incomes have increased, the percentage of income spent on food has decreased. Therefore, the ‘weightage’ or importance of food has been reduced from 45.86% to 36.75%.
Increase in importance of housing: On the other hand, expenses like house rent, electricity and water have increased. Therefore, the importance of housing has been increased from 10% to about 17-18%.

Digitization and modernization

In this new system that keeps pace with the times, old and obsolete things have been excluded.

Excluded: Products like VCR, DVD player, radio, tape recorder, which are no longer used by anyone, have been removed from the list.
Added: Modern services like OTT subscription, mobile recharge, online food order, travel and personal care have been added.
Online tracking: In 2012, the dominance of e-commerce was less. But now prices will be tracked from about 12 digital platforms like Amazon or Flipkart.

What will be the impact on the common man?

The impact of this change is going to be far-reaching.

Benefits for RBI: Based on accurate data, the Reserve Bank of India (RBI) will be able to set the repo rate, which will help in controlling inflation.

Government employees and pensioners: The dearness allowance (DA) and pension of central and state government employees are based on CPI. With the new and accurate basket, they are expected to get the right allowance in line with the current market cost.

International standards: India is now compliant with the International Labour Organization (ILO) standards, which will make the country’s economic data world-class.