The Consumer Price Index (CPI) is a statistical concept and a key macroeconomic indicator that measures the average change over time in the prices paid by consumers for a fixed basket of goods and services. It is the primary measure of retail inflation in the economy, reflecting the erosion of the purchasing power of the Indian Rupee.
The modern, unified CPI (Combined) was introduced by the Ministry of Statistics and Programme Implementation (MoSPI) in 2011-12 to solve the problem of having multiple, separate indices (like CPI-IW, CPI-AL) that did not reflect the cost of living for the economy as a whole. This unified index, which combines rural and urban price data, is released monthly by the National Statistical Office (NSO), a wing of MoSPI.
The mechanism involves tracking the prices of a representative "basket" of goods and services, which is determined by the Household Consumption Expenditure Survey (HCES). The CPI is calculated as the weighted average of the market prices of these items compared to a base year. Since 2014, the Reserve Bank of India (RBI) has used the CPI (Combined) as the official inflation target, anchoring its Flexible Inflation Targeting framework and influencing monetary policy decisions like interest rates. The CPI replaced the Wholesale Price Index (WPI) as the main measure of inflation in 2013.
The CPI series was recently and significantly updated in February 2026. The base year was revised from 2012 to 2024 to reflect current consumption patterns. The number of items in the basket was increased from 299 to 358. The new series adopted the internationally recognized COICOP 2018 (Classification of Individual Consumption According to Purpose) framework, which replaced the earlier structure and enables global comparability. A major change was the reduction of the weight of Food and Beverages from 45.86% to 36.75%, while the weight of categories like Housing and Utilities was increased to better reflect modern household spending.