1 day ago
India Considers New Cost-of-Living Index Alongside Existing CPI
India’s main inflation number is called the Consumer Price Index, or CPI.
It averages price changes across many households and products.
But different families spend their money in different ways.
A family with children may pay more for education, while older people may spend more on healthcare.
Food makes up a smaller share of spending than it did decades ago, while rent and services have become more important.
Rajni Thakur said India could create another index to show these different experiences.
She also said India might update the CPI’s spending weights more often.
Better information could help policymakers and households understand lasting price increases more clearly.
Rajni Thakur of L&T Finance said households experience inflation differently from India’s headline Consumer Price Index.
Food’s share of household spending has fallen, while education, rent and healthcare have become more significant expenses.
Changing consumption patterns mean young families, retirees and students may face different inflation rates.
Thakur proposed a separate cost-of-living index covering different income groups, cities and states.
She also suggested reviewing CPI weights every two or three years, though more frequent revisions would cost more.
- Who
- Rajni Thakur, chief economist at L&T Finance, proposed changes to how India measures inflation.
- What
- She recommended considering a separate cost-of-living index alongside the existing Consumer Price Index.
- Where
- India, with the article datelined Chennai.
- When
- The proposal is made as household consumption patterns are changing; the article gives no specific publication date.
- Why
- The CPI is an all-India average and may not reflect the different inflation experiences of households, income groups, cities or states.
Separate Index Advocates
Aggregate CPI Defenders
Measuring household experiences
Separate Index Advocates
A separate cost-of-living index could better show inflation for different income groups, cities, states and household types.
Aggregate CPI Defenders
The existing CPI weights are statistically derived and appropriate for measuring aggregate price movements.
Updating consumption weights
Separate Index Advocates
Revising weights every two or three years could better reflect rapidly changing consumption patterns.
Aggregate CPI Defenders
More frequent revisions would create higher administrative costs, making India’s existing five-year cycle a practical consideration.
Using newer price data
Separate Index Advocates
Scanner data and online prices could eventually provide more granular inflation information.
Aggregate CPI Defenders
India is not yet ready to rely on those sources because substantial consumption still occurs through neighborhood markets and traditional retail channels.
Key facts
- Current measure
- India’s Consumer Price Index tracks aggregate price movements using household spending weights and monthly price changes.
- Food spending
- Food accounted for more than 50% of household consumption a couple of decades ago; it now represents about 36% in rural areas and 47% in urban areas.
- Rising expenses
- Education, rent, healthcare and out-of-pocket medical expenses have become more significant household costs.
- Current weight cycle
- India revises CPI weights on a five-year cycle.
- Proposed revision cycle
- Thakur suggested examining revisions every two or three years.
- Possible data sources
- India could eventually use scanner data and online prices, but traditional retail and neighborhood markets remain significant.
Sources
Related news
India's July retail inflation rises to 4.45%, above RBI target
India's 2026 Household Budgets Shift as Groceries Fall, Rents Rise
India Retail Inflation Rises to 4.45% on Food Prices
India Retail Inflation Broadens, Hits 19-Month High in July
Salary Hikes Can Quietly Fuel Lifestyle Inflation
Retail Inflation Rises to 4.45% in July on Food Prices
L&T Secures Large ONGC Offshore Order for West Coast Projects
Sensex Slumps 555 Points as Nifty Dips Below 23,400
Gold-loan NBFCs face tougher competition as banks expand offerings
REC raises Rs 500 crore through India’s first tokenised bond
