India’s inflation rate under the new CPI series has hit the highest in eight months, falling within the Reserve Bank of India’s tolerance band for the first time since August 2025. This indicates status quo on repo rate in the long term.
India’s new consumer price index is projected to rise to 2.75% in January 2026 from 1.3% in December 2025, when the old CPI series was in effect, according to data released by the Union Ministry of Statistics and Program Implementation on Thursday. The figure was pegged at 2.77% in a Bloomberg survey of economists.
Food inflation rate according to MOSPI was 2.13%.
The weight of volatile goods like food in the new consumer price index has been reduced by almost half to about 36.8% and the base year has been shifted from 2012 to 2024. The prices have also been aggregated across the country. New categories like rental for rural housing have been added.
The enhanced CPI will also track spending in areas such as online shopping, dining out and streaming services, including Amazon and Netflix.
The change comes amid scrutiny of the RBI’s inflation forecasting model for consistently underestimating price pressures, potentially contributing to a tighter policy stance.
Certainly, India’s inflation rate is still below the RBI’s 4% target. The revised CPI series may reduce expectations of further repo rate cuts. RBI Governor Sanjay Malhotra last week left the benchmark unchanged and indicated that the policy was likely to remain on hold for an extended period.
Inflation in the Indian economy is also under control due to GST rationalization last year, although recent trade deals have improved market sentiment.
India’s economy is projected to grow by 7.4% in the fiscal year to March 31, 2026, and by over 7% in the next fiscal year.
analysts opinion
Radhika Rao, Senior Economist, DBS Bank Singapore: “There were some unknowns in the revised CPI series, particularly the impact of the methodological changes on the headlines.
“The revised inflation series trended slightly upward compared to the old base, with stronger food likely offsetting more downward pressure on core inflation.”
Madhavi Arora, chief economist, MK Global: “We do not expect the new inflation series to materially impact policy in the near term. An extended pause in rates looks likely given the cyclical uptick in both growth and inflation and improving confidence following the conclusion of India-US trade talks.”
