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   Retail inflation rises to 2.75% in January under new CPI series

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   India retail inflation at 2.75% in January 2026 under new CPI series

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   Retail inflation news, Retail inflation latest news, Top news headlines in Retail inflation category, India CPI January 2026, new CPI series update, food weight reduced in CPI, consumer price index India, inflation rate January 2026, RBI inflation outlook, India economy update

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   India retail inflation rose to 2.75% in January 2026 under the new CPI series, with food weight sharply reduced in the index basket.

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• Retail inflation stood at 2.75% in January 2026 under the revised CPI series reflecting changes in the consumer price index basket.

• The government reduced the weight of food in the CPI basket to about 37% from nearly 46% altering inflation calculations.

• The revised series aims to better capture changing consumption patterns while impacting volatility in headline inflation data.

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India’s retail inflation climbed to 2.75% in January 2026, according to data released under the newly revised Consumer Price Index CPI series. The latest figure marks the first major reading under the updated methodology, which introduces significant changes in the composition and weighting of items in the inflation basket.

One of the most notable revisions in the new CPI series is the sharp reduction in the weight assigned to food items, historically the most volatile component of the retail inflation index. The weight of food in the CPI basket has been reduced to approximately 37%, down from around 46% in the previous series.

This structural shift is expected to influence the way inflation trends are interpreted in the coming months, particularly in a country like India where food prices play a major role in shaping household budgets and public perception of price rise.

Understanding the CPI Revision

The Consumer Price Index is the primary measure of retail inflation in India. It tracks the change in prices of goods and services commonly consumed by households. The index is crucial for monetary policy decisions by the Reserve Bank of India RBI, wage negotiations, government schemes and economic planning.

Over time, consumption patterns change. As incomes rise and lifestyles evolve, the proportion of spending on different goods and services also shifts. To ensure that inflation measurement remains relevant and accurate, the government periodically revises the CPI base year and basket composition.

The introduction of the new CPI series reflects updated consumption data and aims to provide a more realistic picture of household spending patterns in contemporary India.

Reduction in Food Weight

The most significant change in the revised CPI series is the reduction in the weight of food items from about 46% to nearly 37%. Food prices in India are known for their volatility, influenced by seasonal factors, weather conditions, supply chain disruptions and global commodity trends.

In the previous CPI framework, fluctuations in food prices often had a large impact on headline inflation. Even a modest rise in vegetable or cereal prices could push overall inflation higher due to the heavy weight assigned to food.

By lowering the food weight, the government has effectively reduced the influence of short-term food price spikes on the headline inflation number. This could result in smoother inflation trends, even when certain food items witness sharp price movements.

However, economists note that while statistical volatility may decline, food prices continue to matter deeply for households, especially lower-income groups that spend a larger share of their income on essentials.

Inflation at 2.75% in January

The January 2026 retail inflation rate of 2.75% remains within the RBI’s target range, which is set at 4% with a tolerance band of 2% on either side. The latest reading suggests that price pressures remain moderate.

Compared to historical standards, inflation below 3% is relatively low for India. Analysts attribute the current level to stable commodity prices, improved supply chains and contained core inflation.

Core inflation, which excludes food and fuel, often provides insight into underlying demand conditions in the economy. With the new CPI series altering the weight of food, the distinction between headline and core inflation becomes even more significant.

Implications for Monetary Policy

The RBI closely monitors retail inflation while determining interest rate policy. A stable and moderate inflation environment provides room for the central bank to focus on supporting economic growth.

If inflation remains below the 4% target midpoint, policymakers may adopt a neutral or accommodative stance, depending on growth conditions.

However, experts caution that the lower food weight could affect the interpretation of inflation trends. If food prices rise sharply but headline inflation remains contained due to reduced weighting, policymakers will need to assess broader economic signals before making decisions.

Reflecting Changing Consumption Patterns

The revised CPI basket is based on updated household consumption surveys. Over the years, Indian consumers have diversified their spending, allocating more income to services such as healthcare, education, transport and communication.

Urbanisation, digitalisation and rising incomes have altered purchasing behaviour. As a result, non-food items now account for a larger share of household expenditure compared to previous decades.

The reduction in food weight reflects this structural change. Policymakers argue that the CPI must mirror actual consumption patterns to remain credible and useful.

Economic Context

India’s economy has shown resilience despite global uncertainties. Stable inflation supports consumer confidence and investment sentiment. A controlled inflation environment also reduces pressure on interest rates, borrowing costs and fiscal policy.

Global factors, including commodity prices and supply chain dynamics, continue to influence domestic inflation. However, the revised CPI series may moderate the impact of external shocks, especially those affecting food commodities.

Debate Among Economists

The decision to reduce food weight has sparked debate among economists and policy analysts. Some argue that the move improves statistical accuracy and aligns with evolving consumption trends.

Others caution that food inflation remains a critical political and social issue in India. Even if its statistical weight declines, rising food prices can significantly affect household budgets and public sentiment.

There are also concerns that reduced food weighting could mask distress in rural areas where food expenditure forms a larger proportion of total spending.

Experts suggest that policymakers should monitor disaggregated data to ensure that inflation trends are interpreted comprehensively.

Impact on Households

For consumers, inflation figures influence expectations regarding wages, savings and spending. A lower headline inflation rate may improve confidence, but the actual experience of price rise varies across income groups.

Urban households may spend more on services and discretionary items, making the revised basket more representative for them. Rural households, however, still allocate a substantial share to food and essentials.

Understanding these differences is essential for targeted policy interventions.

Government Perspective

Officials have stated that the revised CPI series enhances transparency and accuracy. The updated methodology incorporates better data collection, improved sampling techniques and refined classification of goods and services.

By aligning the index with current economic realities, the government aims to strengthen policy formulation and public trust in economic indicators.

The revision also brings India’s inflation measurement practices closer to international standards, where periodic updates are common.

Future Outlook

Looking ahead, inflation trends will depend on multiple factors, including global commodity markets, domestic demand conditions and fiscal measures.

The reduced food weight may lead to more stable headline inflation figures, but policymakers will continue to examine detailed components of the index.

If food prices remain stable and core inflation is contained, overall inflation could stay within the RBI’s comfort zone in the coming months.

However, unexpected shocks such as extreme weather events or geopolitical tensions could influence price trends.

Broader Significance

The January 2026 inflation reading under the new CPI series represents more than just a data update. It marks a shift in how India measures and interprets price changes.

Accurate inflation measurement is fundamental to economic planning. It influences government spending, welfare schemes, tax policies and central bank decisions.

The revision underscores the importance of adapting statistical tools to reflect evolving economic conditions.

Conclusion

India’s retail inflation stood at 2.75% in January 2026, marking the first key reading under the revised CPI series. The significant reduction in food weight from around 46% to approximately 37% represents a major methodological change.

While the lower food weight may reduce volatility in headline inflation, policymakers and economists will continue to monitor detailed price trends to ensure a balanced assessment.

As India’s economy evolves, periodic updates to economic indicators remain essential. The new CPI series aims to provide a clearer, more accurate reflection of consumer spending patterns and inflation dynamics.

In the months ahead, the interaction between statistical changes and real-world price movements will determine how effectively the revised index captures the true cost of living for Indian households.

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