​Moving on: On India’s Consumer Price Index and a new base year

The retail inflation figure for December 2025 is the final instalment of the current series of the Consumer Price Index (CPI), with a base year of 2012, before it is updated to a new base year and with new weightages. The CPI data this year have been particularly useful in highlighting the problems with relying on a dataset that has not been updated in more than a decade. The inflation figure for December 2025 stood at 1.33%. The fact that it was a three-month high is merely a statistical curiosity since it was also the third lowest since the current series began. Overall, in the April-December 2025 period, inflation has averaged 1.7%, substantially lower than the 4.9% average in the same period of 2024. But it does not feel that way. Anecdotal evidence and hard data show that the inflation that people are really experiencing is far higher than what the official data show. For example, the government’s own first advance estimates for GDP growth this year show that it expects private consumption to grow slower than it did last year. If inflation had indeed eased to the degree that the official data suggest, surely consumption should have picked up. According to its latest edition of the Reserve Bank of India’s inflation expectations survey from December, households perceived inflation to be 6.6% — a far cry from the official 1.33% — and felt that it would accelerate to 7.6% in three months and to 8% in a year. The feeling clearly is that not only are prices rising, but they are rising at a faster rate. Failing to capture this is where the official data let policymakers down.

The most basic issue with any inflation data is that a single figure is expected to capture the variety of price changes that take place across the country. The national inflation number aggregates price levels and movements from districts in Kashmir to villages in Kerala and everywhere in between, for both urban and rural. Naturally it will lose nuances in the process. Further, while this is the natural peril of computing national statistics for a diverse country such as India, the outdated nature of the CPI makes matters significantly worse. The weightages of the various sub-sectors in the index were based on consumption patterns in 2012. People consume very differently now, especially because of various central and State subsidies being offered. Thankfully, on February 12, the government will release the January inflation data based on the new series of the CPI. This series will see the base year updated to 2024, and will incorporate new weights based on the Household Consumption Expenditure Survey 2023-24. It is an update sorely needed.

Overall Analysis

The editorial examines the limitations of India’s current Consumer Price Index (CPI) series and makes a strong case for updating its base year and weightages. It begins by noting that the December 2025 inflation figure marks the end of the CPI series based on the 2012 base year. While the official data suggest historically low inflation, the author immediately questions their credibility by highlighting the disconnect between reported numbers and everyday consumer experience.

The argument is developed through a contrast between statistical calm and economic reality. Phrases such as “statistical curiosity” and “it does not feel that way” signal scepticism toward headline figures. By citing slower private consumption growth and the Reserve Bank of India’s inflation expectations survey, the editorial underscores that households perceive inflation to be far higher than official estimates. This gap between perception and data is presented as a serious policy failure, since inflation measures are meant to guide economic decision-making.

In the second paragraph, the editorial steps back to explain a structural flaw in inflation measurement: compressing diverse regional price movements into a single national figure. While acknowledging that some loss of nuance is unavoidable in a country as diverse as India, the author stresses that an outdated CPI base year worsens the distortion. Consumption patterns have changed significantly since 2012, especially due to subsidies and evolving spending habits, making the current index increasingly unrepresentative.

The editorial ends on a cautiously optimistic note. The announcement of a new CPI series with a 2024 base year and updated weights derived from the latest Household Consumption Expenditure Survey is welcomed as a long-overdue reform. The language here is measured and constructive, presenting the update as essential rather than celebratory — a necessary correction to restore the CPI’s relevance and credibility.

Important Vocabulary (5)

1. Instalment – a part of a series released over time.
2. Anecdotal – based on personal accounts rather than systematic evidence.
3. Aggregate – to combine several elements into a whole.
4. Nuances – subtle differences or variations.
5. Peril – danger or risk.

Conclusion & Tone

The editorial argues that India’s inflation data have become increasingly disconnected from lived economic reality due to an outdated CPI framework. Updating the base year and consumption weights is presented as vital for accurate policymaking and public trust in economic statistics.

Tone: Analytical, sceptical, and reform-oriented — questioning official data while welcoming necessary statistical modernization.