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Informist, Thursday, Oct. 30, 2025

 

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--MoSPI releases paper on proposed changes in housing index in new CPI series  
--MoSPI seeks views on proposed housing index changes in new CPI by Nov 20 
--MoSPI proposes covering rural areas for housing index in new CPI series 
--CONTEXT: Current CPI series covers only urban areas for housing index
--MoSPI moots monthly rent data collection for housing index in new CPI 
--MoSPI moots excluding employer provided accommodation in new CPI series

 

NEW DELHI – The Ministry of Statistics and Programme Implementation has proposed several sweeping changes to housing index in the new CPI series, which will be introduced in February. Among key changes, the ministry has proposed adding rural areas in the compilation of the housing index in the new CPI series, against the current practice where only urban areas are covered. 

 

In a discussion paper released Thursday, on which views are invited by Nov. 20, the ministry has also proposed collecting rent data from all dwellings every month. Currently, the ministry captures rents from all dwellings in six months.

 

The ministry has also suggested excluding government accommodations and other employer-provided dwellings from the compilation of the housing Index as "these do not reflect transactions in the actual rental market". The ministry will continue to collect rent data from 12 dwellings per market in urban areas. For the rural sector, data will be collected from six dwellings in select villages.

 

The government is currently working on revising the CPI and the new series with 2024 as base year will be released in February. This is the first revision of the CPI in over a decade. The housing index has one of the biggest issues with the current CPI series. 

 

According to the statistics ministry's data, housing inflation has been under 6% for nearly seven years. Real world evidence, however, suggests that house rents have increased extremely sharply in the last couple of years. Several private surveys have shown over double-digit rise in housing and rental prices, much higher than captured by the CPI.

 

A key issue has been the inclusion of government and employer-provided housing. While government housing – central, state, and those provided by public sector undertakings to their employees – makes up for less than 1.5% of the entire CPI basket, it has in the past exerted an outsized influence on the headline inflation rate due to the methodology that is used to calculate housing inflation. For instance, consider the 105.6% increase in central government employees' house rent allowance in mid-2017, as recommended by the 7th Central Pay Commission. This led to housing inflation jumping from 4.70% in June 2017 to 8.25% by the end of the calendar year, with headline inflation rising in tandem from an all-time low of 1.46% to 5.21% in December 2017.

 

The use of house rent allowance as a proxy for rent in case of government housing is also conceptually problematic as housing inflation then is determined by the occupant and not demand-supply forces. If a government employee living in a house is replaced by a junior staff, the 'rent' of that house--assuming it is part of the statistics ministry's sample--would fall because the new occupant's house rent allowance is lower. The ministry said that this issue was highlighted by several users including the Reserve Bank of India.

 

While such a move may push up overall inflation on its own, the influence of housing on headline inflation may also increase in the new CPI inflation series on account of an increase in its weight. As per the Household Consumption Expenditure Survey for 2022-23 (Aug-Jul), rent made up 6.56% of monthly per capita expenditure in urban areas, up from 6.24% in 2011-12 (Jul-Jun). Rural India too saw an increase in the share of house rent to 0.78% from 0.45%.  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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