10 hours ago
Electricity & housing indices to be tweaked in revised CPI by adding fixed & meter charges
The government plans to revamp the
electricity index
in the
Consumer Price Index
(CPI) to capture slab-wise
power consumption
in the country, people familiar with the development told ET.
The move is a part of the overhaul of the current CPI to better capture price trends and the cost of living.
Currently, electricity prices in the CPI are recorded on a per unit volume basis. The revised index will also incorporate fixed and meter charges, providing a more accurate picture of electricity consumption and its cost to people.
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ET Bureau
"Moving towards a slab rate system will give a better reflection of consumption than using the average per unit cost. It will offer a more comprehensive view in terms of the burden on households," said Sakshi Gupta, principal economist at
HDFC Bank
. She added that this will also allow the CPI basket to better capture seasonal variations.
For instance, during summers, electricity usage typically rises in the North, which the slab-wise data will capture better, Gupta explained. "If you are using per-unit cost, then you are not capturing the increase in consumption."
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Electricity accounts for 2.26% weightage in the CPI. The electricity index recorded an average inflation of 6.4% in FY25 compared to 9.7% in FY24.
The
Housing Index
will also undergo changes in the new CPI series, set to be released in the first quarter of 2026. Under the revamped series, the housing index will exclude employer and government provided accommodation, ET has learnt.
"The current house price index underestimates the money spent on housing," noted Gupta. Although government-provided housing accounts for a lower share of the CPI basket and does not reflect the overall market, it tends to influence the headline inflation.
Housing inflation
declined to 2.8% in FY25 from 3.9% in FY24.
"Rentals in non-government and non-employer housing are significantly higher, as recent trends from other price indices or anecdotal evidence have shown," said Gupta.
Housing accounts for 10.07% weight in the CPI. The current CPI series, with a base year of 2012, covers only the urban sector. The new series will also include a rural housing index, as consumption surveys indicate spending on house rents in rural areas.
