MoSPI Issues Discussion Paper 2.0 on How to Treat Free PDS Items in Consumer Price Index (CPI) Computation
SDG 8: Decent Work & Economic Growth | SDG 10: Reduced Inequalities
Institutions: Ministry of Statistics & Programme Implementation (MoSPI)
MoSPI has released Discussion Paper 2.0 on the treatment of free PDS (Public Distribution System) food grains in the Consumer Price Index (CPI) compilation.
Since 1 January 2023, the government expanded its free food grain scheme to 75% rural and 50% urban populations. This raises questions about how to reflect these free goods in inflation measurement.
The new discussion draft refines methodology, improving coverage of price collection, exploring alternative data sources, and leveraging modern tech. It is built after consultations with the RBI, IMF, UN agencies, and Indian experts, following the first version released in December 2024.
MoSPI invites comments from experts, state governments, financial institutions, and stakeholders by 22 October 2025.
How free food distribution is counted (or omitted) in inflation metrics will influence perceptions of food inflation, real incomes, and fiscal policy. This paper could affect how subsidies are reflected in macro indicators, and how states and central agencies align their price statistics.
What is CPI? → The Consumer Price Index (CPI) is an indicator that tracks average change over time in the prices paid by urban and rural consumers for a basket of goods and services. It matters because CPI is widely used as a measure of inflation, cost-of-living adjustment, and policy benchmarks.
What is Food Inflation? → Food inflation refers to the rate at which the prices of food items, such as cereals, pulses, milk, fruits, and vegetables, rise over time. It matters because food makes up nearly half of India’s CPI basket, so even small price increases directly affect household budgets and monetary policy.
What is Real Income? → Real income is the purchasing power of people’s earnings after adjusting for inflation. It matters because even if nominal wages rise, high prices can erode actual living standards, so stable inflation is essential for real welfare gains.
What are Macro Indicators? → Macroeconomic indicators are aggregate measures (like GDP growth, inflation, fiscal deficit, unemployment) used to assess an economy’s overall health. They matter because policymakers rely on them to design budgets, set interest rates, and guide investment priorities.
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https://www.mospi.gov.in/sites/default/files/announcements/Discussio_paper-2.0_CPI04102025.pdf