The rebasing of CPI to 2024 with a reduced food weight could alter the conduct of monetary policy in India. Critically examine.

MoSPI's new CPI series (base 2024=100) uses HCES 2023-24 weights. It cuts the weight of food and beverages in Combined CPI from 42.617% to 36.753% [1]. Headline CPI is the statutory target under flexible inflation targeting (4% ±2%) [2]. The change will therefore alter how the MPC reads inflation, but it alters policy less than it first appears.

How rebasing could alter monetary policy

• Narrower headline–core gap: With a smaller food share, supply shocks move headline inflation less. This partly meets the Economic Survey 2020-21's call for greater focus on core inflation [3].
• Fewer reflex rate hikes: Leaving out vegetables and pulses brought food inflation down to about 4.3% (Apr–Dec FY25) [4]. A lower food weight dampens such weather-driven spikes in the target variable.
• Sharper demand signal: The basket now has 358 items (up from 299), and it adds rural housing and online prices [1]. CPI now captures more services inflation, which the repo rate can actually influence.
• Credibility: Using COICOP 2018 and alternative data brings Indian statistics in line with global standards [1].

Limits and concerns

• Food still dominates: In September 2026, headline inflation rose to 5.54% and rural inflation to 6.08%. Both were driven by CFPI at 7.74% and onion at 108.09% [5]. Food still makes up about 42% of the rural basket [1].
• Second-round effects: Restaurants and accommodation inflation was 9.36% [5], which shows food shocks spilling into services. RBI warns that playing down food could bias policy and erode credibility [6].
• Comparability break: The 4% target was set on the 2012-base series. The back series is linked only at the general index level [1], so "4%" no longer measures exactly the same basket.
• Legal framework unchanged: The target is still headline CPI, as in almost all inflation-targeting countries (only Uganda targets core) [6]. A failure counts only after three consecutive quarters outside the 2–6% band [2]. Conduct therefore changes in degree, not in kind.

Overall, rebasing makes the target more representative and less food-volatile. It refines monetary policy rather than overhauling it. Going forward, the MPC should explain its decisions using headline inflation alongside measures that exclude volatile items. Supply-side steps such as Operation Greens for TOP crops should support this. The target should be recalibrated in each five-yearly review, protecting price stability for growth (SDG 8).