India’s retail inflation at 2.75% in Jan under new CPI series

India's retail inflation rose to 2.75% in January under the newly revised Consumer Price Index (CPI) series with base year 2024, marking the highest level in eight months, as soaring tomato and gold prices offset broader moderation in several food items.The central government on Thursday released the first inflation data under the new 2024-based CPI series, replacing the 2012-base index. According to data from the Ministry of Statistics & Programme Implementation, headline retail inflation stood at 2.75% in January, up sharply from 1.33% in December 2025. In January 2025, inflation had been significantly higher at 4.26%.With the latest reading, headline inflation has moved above 2%—the lower tolerance band of the Reserve Bank of India—for the first time since August 2025, potentially influencing the monetary policy outlook ahead of the next review.
Food Inflation and Key Drivers
Retail food inflation in January was recorded at 2.13%, with rural food inflation at 1.96% and urban food inflation at 2.44%. While overall food inflation remained contained, sharp price spikes in select items drove the uptick in the headline number.Tomato prices surged 64.8% year-on-year in January, emerging as the principal contributor to inflation. Gold prices also exerted upward pressure. In contrast, several key vegetables saw deep deflation: onion prices declined 29.3%, potato 29.0%, and garlic 53.0% compared to the same month last year.Core CPI inflation under the new series stood at 3.4%. As per a note by SBI Research, core inflation under the old 2012-based series would have been higher at 4.15%. “The decline in core is mainly due to the change in weightage in gold, which declined to 0.62% in the 2024 series, compared to 1.08% in the 2012 series,” the note said.
Structural Changes in the New CPI Series
The CPI base year has been revised from 2012 to 2024 using data from the Household Consumption Expenditure Survey 2023-24. The statistics ministry said the revision was undertaken “for enhancing the coverage and representativeness of the inflation measure.”A key structural change in the new series is the reduced weight of volatile food items. Under the old series, food and beverages together accounted for 45.9% of the CPI basket. In the revised 2024 series, this has been cut to 36.75%, with food prices (excluding beverages) carrying a weight of 34.77%.The total number of weighted items has increased to 358 from 299 earlier. Goods items rose from 259 to 308, while services increased from 40 to 50, reflecting evolving consumption patterns.
Newly added items include rural housing, online media streaming services, value-added dairy products, barley and its products, pen drives and external hard disks, attendants, babysitters, and exercise equipment. Items such as VCR/VCD/DVD players and hiring charges, radio, tape recorders, second-hand clothing, CD/DVD audio-video cassettes, and coir/rope have been removed.Notably, rural house rent has been included in the CPI basket for the first time. Paras Jasrai, Associate Director at India Ratings and Research, said rural house rent inflation stood at 3.2% in January 2026, higher than urban house rent inflation of 1.9%.
State-wise Inflation and Policy Outlook
Among states, Telangana recorded the highest inflation at 4.92%, followed by Kerala (3.67%), Tamil Nadu (3.36%), Rajasthan (3.17%), and Karnataka (2.99%).Aditi Nayar, Chief Economist at ICRA, said the February CPI print—due before the next Monetary Policy Committee (MPC) meeting—will provide additional clarity on interpreting trends under the new series. She added that the upcoming release of the new GDP series at the end of February 2026 could lead to revisions in the size of the economy and quarterly growth rates for 2024–2026.“These data points will be key to reassess India’s growth-inflation mix and the direction of monetary policy action,” Nayar said.With headline inflation now breaching the RBI’s lower tolerance band and structural adjustments altering the inflation basket, policymakers are likely to closely monitor incoming data before recalibrating the interest rate trajectory.

(Business Correspondent)