Rebasing price indices improves measurement but complicates policy comparison. Discuss with reference to the new CPI series (base 2024).

Rebasing updates a price index's base year, basket and weights so that it reflects what households buy today. MoSPI's new CPI (base 2024=100) was released in February 2026 [1]. It measures prices better. But when it recorded 6.1% in October 2026 [2], its first breach of the RBI's 6% upper limit, the reading was hard to compare with earlier data.

How rebasing improves measurement

• Current consumption weights: Measured on the old classification, the weight of food and beverages falls from 45.86% to 40.10% in the new series. This shows households spending more on non-food items [3].
• Global standards: The series uses the COICOP-2018 classification, so India's data can be compared with other countries [3].
• Clearer view of services: The finer categories show inflation spreading beyond food and fuel. Restaurants & accommodation reached 10.1% in October 2026, the first double-digit reading in the new series [4].
• Better policy anchor: Headline CPI is the legal anchor for the 4% ±2% target under Sec 45ZA, RBI Act [5]. A basket closer to real spending makes that target more meaningful.

How it complicates policy comparison

• Short history: Sectoral data starts only in January 2026, so "series highs" cover less than a year [4].
• Limited linking: The two series use different classifications, so they can be linked only at the general-index level through linking factors [3]. Food-group trends cannot be compared across the old and new series.
• Different baskets: October 2026's 6.1% is not strictly comparable with October 2024's 6.2% on the old basket [4].
• Target set before testing: The 2–6% band was re-notified in March 2026 for 2026–31 [6], with almost no data on how the new basket behaves. A lower food weight may change volatility. That bears on the headline-vs-core question in the RBI's 2025 framework review [7].

Rebasing: the trade-off

Updated basket ──► Better accuracy ──► Better policy anchor
       │
       └──► Break in the series ──► Weaker trend and target comparisons

Figure: rebasing gives accuracy at the cost of continuity

Rebasing gives up some continuity to gain accuracy, and the trade is worth making. MoSPI has published a back series for 2013–2024 [3]. It should go further and link the series below the general-index level. Until the new series has a longer history, the MPC should read it alongside core inflation and the trend. Reliable statistics are the base of credible, rules-based monetary policy.