India will release inflation data on Thursday under a revised consumer price index framework, marking the first major overhaul in more than a decade. The recalibration, undertaken by the Ministry of Statistics and Programme Implementation, updates spending weights to reflect contemporary consumption patterns and changes the base year to 2024 from 2012.

The release, due at 4 p.m., will include inflation figures for 2025 calculated using the new index weights, allowing direct comparability. Market participants are closely watching the print as it may signal a modest upward shift in measured inflation and shape expectations around the policy path of the Reserve Bank of India.

The most consequential change lies in the weight composition. Food, historically the dominant and most volatile component, will now account for about 36.8% of the index - down from nearly half earlier. At the same time, the weight of core inflation, which excludes food and fuel, will rise to nearly 58% from 47.3%, according to calculations cited by market participants.

New categories such as rural housing rentals and online shopping have been added, while outdated items including video cassette recorders, radios and horse-cart fares have been removed. Electricity prices, standardized gold and silver jewellery norms, and broader housing costs are now embedded in the basket. Free food supplied under government welfare programs will be excluded from calculations.

This recalibration reflects a structural shift in India’s consumption story. Rising incomes and urbanisation have gradually reduced the share of household spending on food, while services, digital consumption and housing have expanded. Officials have said the revised series better captures current economic realities and improves the accuracy of macroeconomic measurement.

Economists surveyed ahead of the release expect the new framework to lift the January inflation reading to around 2.77%, compared with 1.33% under the previous series in December. Even at that level, inflation would remain below the RBI’s 4% target. However, the shift in weights and base year complicates near-term interpretation and may alter the perceived trajectory of price pressures.

For monetary policy, the timing is sensitive. The Reserve Bank of India, under Governor Sanjay Malhotra, held the benchmark interest rate unchanged last week and signaled a prolonged pause. The central bank has faced scrutiny over its inflation forecasting model after it consistently overestimated price pressures last year. The CPI overhaul may therefore be seen as a statistical reset that could enhance policy calibration.

A higher near-term inflation print = even if driven by methodology rather than fresh price shocks = may reinforce the central bank’s caution. Market participants expect the new series to show a 30–50 basis point upward bias initially. That could delay any consideration of rate cuts and support a “long hold” stance, especially amid elevated government borrowing.

The bond market reaction will be critical. Yields on the benchmark 10-year government bond recently climbed to their highest level in over a year after the RBI refrained from announcing additional bond purchases. A stickier inflation trajectory under the revised index could keep yields firm, influencing funding costs across the economy.

Equity markets will interpret the data through the lens of liquidity and valuation. Rate-sensitive sectors such as banking, real estate and automobiles may face pressure if expectations for monetary easing are pushed further out. Conversely, companies exposed to services consumption and urban housing may benefit from stronger representation in the new basket, which aligns more closely with evolving spending trends.

Foreign portfolio flows could also respond. Global investors remain highly sensitive to policy signals in emerging markets. If the revised CPI suggests structurally firmer core inflation, India’s relative yield attractiveness may improve, supporting fixed income inflows but capping equity multiple expansion.

There is also a broader macro implication. The government will publish gross domestic product data later this month based on the updated consumer spending patterns. Analysts expect the recalibration to potentially revise the size of the economy upward, which could reinforce India’s trajectory toward becoming the world’s fourth-largest economy.

From a policy standpoint, the heavier weight on core inflation may enhance transmission effectiveness. Core inflation is generally more responsive to interest rate adjustments than food-driven spikes. By reducing the volatility induced by food prices, the RBI may gain clearer visibility into underlying demand conditions.

However, risks remain. If the new series reveals that core pressures are more persistent than previously estimated, it may constrain monetary flexibility. At the same time, methodological shifts can create short-term noise, making it difficult for markets to disentangle structural change from cyclical momentum.