The Consumer Price Index (CPI) is expected to remain below the 4 per cent target level even under the new series due to a fine balancing of weights, according to a report by Bank of Baroda.
The report noted that the new series is pragmatic as it captures the evolving consumption curve of India. The changes in data coverage and methodology will ensure that headline CPI, which is the crucial target variable for monetary policy decisions, remains contemporary and aligned with international practices.
It stated “with fine balancing of weights in the new CPI series, we expect it to be within the targeted 4+/-2 per cent level”
As per the report, the January 2026 reading of headline CPI came in at 2.8 per cent, in line with the bank’s estimate of 2.9 per cent. Most of the subcomponents of inflation showed no signs of stress. However, volatility persisted in personal care, social protection and miscellaneous goods, largely driven by gold prices.
The report noted that the new series assigns a lower weightage to gold and other ornaments than the previous series.
Similarly, the weight of Tomato, Onion and Potato (TOP) vegetables has also been reduced under the new series. The report said this change efficiently captures the earlier biases that existed in the 2011-12 CPI series and would be crucial from a monetary policy standpoint.
According to the report, the more structured series is holistic in nature as it aligns with the consumption expenditure survey and has higher coverage of items to reflect India’s evolving consumption pattern.
The bank’s in-house BoB ECI is running at -0.4 per cent on a year-on-year basis for the first 11 days of February 2026.
The report added that, except for a few items such as edible oils including groundnut oil, sunflower oil and soya oil, and pulses like Tur and Urad, high-frequency food prices are largely contained and do not pose any immediate risk in the near term.
However, the report cautioned that the trajectory of core inflation needs close monitoring as prices of precious metals pose an upside risk. Even so, with the fine balancing of weights in the new CPI series, Bank of Baroda expects inflation to remain within the targeted 4+/-2 per cent level.
