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The Consumer Price Index (CPI) is one of the most important measures used to track inflation in India. It shows how the prices of goods and services change over time. Recently, India has updated the CPI base year from 2012 to 2024. This change helps to better reflect the current lifestyle, spending habits, and economic conditions of people.
What is CPI and Why is it Important?
The Consumer Price Index measures the average change in prices of items that households regularly buy. These items include food, fuel, clothing, housing, transport, and services. CPI helps the government and the Reserve Bank of India (RBI) understand inflation trends.
For common people, CPI is important because it shows how expensive daily life is becoming. It also affects salaries, pensions, and government welfare schemes. When CPI rises, it means prices are increasing, and when it falls, it indicates price stability or reduction.
Why Was the CPI Base Year Updated?
India updates the CPI base year to ensure that the index reflects current spending patterns. Since the last update in 2012, the Indian economy and lifestyle have changed a lot. Urbanisation has increased, digital services have expanded, and people now spend more on services like internet, travel, and online shopping.
The CPI 2024 revision is based on the Household Consumption Expenditure Survey 2023-24. This survey studied how people spend their money today. As a result, the importance (weightage) of different goods and services in the CPI basket has been updated.
Changes in the CPI Basket
The new CPI includes items that households now spend more on and reduces the weight of items that people use less. For example, spending on services like telecom, air travel, and digital platforms has increased due to higher incomes and changing lifestyles.
This revision ensures that inflation data truly reflects household budgets and real-life spending.
Better and Modern Calculation Method
The government has improved the calculation method of CPI by aligning it with international standards while keeping India-specific features. This helps in comparing India’s inflation with other countries.
The updated system also captures online prices and modern service charges, which were not fully included earlier. This change provides a clearer picture of price trends.
Use of Technology and Reliable Data
The new CPI uses computer-assisted price collection, which reduces errors and improves accuracy. It also collects more data from official government sources such as fuel prices, postal charges, and public distribution system items.
These improvements help reduce mistakes and make inflation data more reliable.
Larger and More Detailed Database
The updated CPI collects information from more sources and locations across the country. This creates a wider and more detailed database, helping policymakers understand price changes better.
More accurate data helps the government take better decisions related to interest rates, economic policies, and social welfare programs.
Why This Revision Matters for People
The CPI base revision ensures that inflation reflects the real cost of living. It helps policymakers design better economic policies and ensures that salary adjustments, pensions, and government schemes are based on realistic price trends.
In simple terms, the revised CPI connects statistical data with everyday life. It helps measure how rising or falling prices affect household budgets across the country.
Conclusion
The CPI base revision to 2024 is an important step to modernise inflation measurement in India. It captures new spending habits, includes digital and service sectors, and improves data accuracy. This ensures that inflation data remains reliable and useful for both policymakers and citizens.
Source: TH
