Page 31 - CII-ARTHA

MARCH 2026

food items tends to decline. Correspondingly, spending statistical noise in headline inflation print marks an
on other categories such as transport, communication, important structural improvement in the policy
health, education, and recreation has increased in line framework.
with their greater contribution to household’s budgets.
The new index captures this by expanding from six broad The first three readings in the new series also brings with
groups to twelve divisions in accordance with the it subtle nuances that are important to notice. In the new
internationally recognised Classification of Individual series, headline CPI inflation for the first quarter
Consumption According to Purpose (COICOP) 2018 (Jan-March 2026) came at an average of 3.10 per cent,
framework. It has also expanded the number of items in well within the RBI’s 2–6 per cent tolerance band and
the CPI basket from 299 to 358 items by including comfortably below the 4 per cent target. Food &
modern additions such as OTT streaming services, rural beverages inflation inched higher to 3.1 per cent in the
housing rent, and value-added dairy products, while fourth quarter (4QFY26) due to uptick seen in veggies
dropping the obsolete ones like VCR, DVDs, Tape prices.
Recorders, Second hand clothing, etc.
For Indian industry, the rebased CPI arrives at a time of
The recalibration has meaningful benefits for industry. considerable strategic importance. The Economic
Previously, headline inflation was heavily influenced by Survey 2025–26 has indicated an upward revision of
unpredictable food prices which were often affected by India's medium-term potential growth to 7 per cent.
monsoon or supply issues with items like the TOP Realising this target necessitates consistent private
(Tomatoes, Onions, and Potatoes) cohort which distorted investment, which is contingent upon maintaining a stable
CPI readings even during periods of general price macroeconomic environment, providing clear policy
stability. CII’s own research has shown that vegetables guidance, and conducting accurate evaluations of
have been the biggest driver of food inflation in the recent inflation trends. The new CPI series strengthens all three
years, exhibiting the highest volatility. This has resulted in pillars. By providing a contemporary representation of
a sharp rise in contribution of food to headline CPI from consumption patterns, it ensures that the interest rate
27 per cent in 2021-22 to 66 per cent in 2024-25. corridor is informed by accurate data, that fiscal planning
This volatility has made the monetary policy decisions reflects genuine cost-of-living dynamics, and that real
complicated with interest rates commonly kept high wage assessments across sectors are grounded in
which at times complicated monetary policy calibration contemporary reality.
by amplifying the influence of short-term food price
shocks on headline inflation. CII commends MoSPI for this comprehensive and timely
reform. We also welcome the Ministry’s emphasis on
The lower food weight in the new CPI is expected to leveraging technology and digitalisation for better data
reduce this volatility meaningfully by providing a more quality, an approach that aligns with CII’s consistent
stable inflation reading that better reflects the cost advocacy for strengthening India’s statistical ecosystem.
pressures.
As India positions itself as a global manufacturing hub
This is crucial for providing a conducive environment for and a resilient, consumption-driven economy, the quality
investments in the country. Monetary policy decisions of its macroeconomic data infrastructure is as vital as its
anchored to a more representative inflation gauge will be physical infrastructure. The rebased CPI is a significant
better calibrated, thus potentially creating the conditions step in building that foundation. Indian industry looks
for a more supportive interest rate environment over the forward to similar rigour being applied to the forthcoming
near to medium term. Industry has repeatedly advocated GDP rebasing, and to an era of data-driven policymaking
for lower real interest rates to bolster private capital that reflects the India of today and not the India of a
expenditure and this rebasing which will result reduced decade ago.

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