Revising the Consumer Price Index Framework

The current methodology for calculating the Consumer Price Index (CPI) weighs food too heavily, which some analysts suggest could be updated to reflect modern spending patterns more accurately. Despite food being a significant part of household expenditure, its weight in the CPI has remained unchanged for over a decade, not accounting for shifts in consumer behavior. With rural households spending approximately 46% and urban households about 40% of their budgets on food, the outdated CPI components also include irrelevant items, necessitating a reevaluation of how inflation is measured. By adjusting the food weight instead of removing it from the inflation framework, the RBI could obtain a clearer picture of inflation dynamics, potentially leading to more effective monetary policy.