The Bank of Baroda predicts that the Consumer Price Index (CPI) will likely stay below the 4 percent target level even with the introduction of a new CPI series. This update is expected to more accurately represent India’s changing consumption patterns and bring data alignment for policy decisions in line with global standards. The bank emphasized the importance of monitoring core inflation closely due to potential price increases in precious metals, but it anticipates that the rebalancing of weights in the new CPI series will help maintain levels within the targeted 4+/-2 percent range.
The revised CPI series aims to ensure that the headline CPI, a key factor for monetary policy, remains relevant and in sync with international norms. By adjusting the weights of various food items to account for seasonal price changes, the new series is better equipped to capture the seasonality in food prices. Looking ahead, the Bank of Baroda foresees that government interventions on the supply side will play a crucial role in sustaining a favorable food inflation trajectory.
According to the Bank of Baroda’s Essential Commodities Index (ECI), the year-on-year rate stands at -0.4 percent for the initial 11 days of February 2026. With the exception of certain edible oils and pulses, the report notes that high-frequency food prices are under control and do not pose immediate risks. Notably, the updated base has reversed the deflationary trend in food inflation observed over the past seven months, primarily due to the reduced weight of the most volatile components like TOP (Tomato, Onion, and Potato) vegetables.
The new CPI series expands the number of weighted items to 358 from 299, covering 1,465 rural and 1,395 urban markets along with 12 online markets. Moreover, it reduces the weight of food in the CPI basket from 45.8 percent to 40.1 percent. The revised basket for CPI estimation now includes items such as rural housing, online media/streaming services, value-added dairy products, barley, pendrive, and external hard disks, while excluding components like radio, tape recorders, DVD players, and second-hand clothing that were previously considered for estimation purposes.
