RBI governor highlights new series for accurate consumption, lower volatility

New Delhi, Feb 23: Reserve Bank of India Governor Sanjay Malhotra on Monday highlighted that the new Consumer Price Index (CPI) inflation series, based on 2024 prices, will better capture Indian households’ consumption patterns and reduce volatility, enabling more accurate CPI measurement.
Speaking after the post-Budget RBI Central Board meeting with Finance Minister Nirmala Sitharaman, Malhotra said the updated series will aid in better estimation of inflation trends.
The new CPI series, released on February 12 by the Ministry of Statistics and Programme Implementation, tracks prices of 358 items, up from 299 in the previous series.
Retail inflation for January, the first month using the new methodology, was 2.75%, slightly above the lower end of the RBI’s 2–6% tolerance band, while the 2025 average remained at 2.2% under both old and new series.
Malhotra noted that changes in methodology may influence CPI projections, and the RBI’s next inflation estimate in the April policy will reflect these updates.
The revision comes amid a review of India’s flexible inflation targeting (FIT) regime, under which the government sets the CPI inflation target every five years in consultation with the RBI.
Currently, the CPI target is 4% with a tolerance band of ±2%, effective from April 1, 2021, to March 31, 2026.
The RBI has submitted its recommendations for the next cycle, which the government is reviewing.
While methodology changes do not necessarily imply a target revision, the RBI is also evaluating whether core inflation should guide monetary policy.
Malhotra reiterated that India’s FIT framework, formally adopted in 2016 following a 2015 agreement, has successfully balanced growth and stability.
The six-member Monetary Policy Committee (MPC), chaired by the RBI governor, determines policy rates to achieve the inflation target.
On foreign reserves, Malhotra clarified that there is no deliberate reduction in US securities holdings; valuation changes, including a weaker US dollar and increased gold holdings, explain recent shifts.
The new CPI series, reflecting updated consumption patterns, expanded coverage, and improved accuracy, is expected to support more effective inflation management and policymaking in India. (PTI)w