Yesterday, the Ministry of Statistics and Programme Implementation (MOSPI) released India’s inflation data for December 2024, revealing that inflation remains significantly above the Reserve Bank of India’s (RBI) comfort zone. Persistently high inflation has far-reaching consequences for the Indian economy. It not only fuels expectations of further price increases—potentially altering consumer behavior and pushing inflation even higher—but also limits the RBI’s ability to lower interest rates, which is critical for reviving economic growth. With the economy already slowing, this situation threatens jobs and deepens economic hardships for the common citizen. This raises a critical question: Is India’s method of measuring inflation outdated? Does it accurately reflect the evolving spending patterns of Indian households? In this article, we will explore how India’s inflation figures might change if the latest consumption trends across various commodity baskets—used as the basis for inflation measurement—are applied to calculate actual price rises for both rural and urban populations.
Household Consumption Expenditure Survey (HCES)
The Ministry of Statistics and Programme Implementation (MOSPI) periodically conducts the Household Consumption Expenditure Survey (HCES) to gather detailed data on household spending habits. The latest report, released on December 27, 2024, compiles data collected between August 2023 and July 2024. HCES provides valuable insights into household consumption patterns, spending behavior, living standards, and overall well-being. Importantly, the survey data determines the budget shares of various commodity groups, which are crucial for constructing the weighting diagram used in calculating the official Consumer Price Indices (CPIs).
In this article, we will analyze how the latest household spending patterns across different consumption categories influence India’s overall inflation calculation. Additionally, we will examine how these patterns have evolved in both urban and rural areas since FY2011-12—the base year for the current CPI series, which serves as the primary benchmark for measuring India’s inflation.
Evolving Rural Spending Trends and Their Alignment with Current CPI Weights
The table below illustrates the evolving spending patterns of rural households across various survey rounds since 1999-2000, mapped against the current Consumer Price Index for Rural (CPI-R) weights derived from the 2011-12 survey.

Column 3 displays the existing CPI-R weights currently used for estimating rural inflation, while Columns 4 to 9 present the distribution of household spending across different commodity categories from multiple survey rounds. It is evident that the present CPI-R weights approximately mirror the consumption patterns from the 68th survey round conducted in 2011-12. However, the spending behavior captured in the 2022-23 and 2023-24 surveys shows significant deviations from these outdated weights, reflecting shifts in rural consumption priorities.
In the subsequent analysis, we will use the latest data from Columns 8 and 9 to recalibrate the rural CPI weights. This updated framework will allow us to estimate rural inflation more accurately, aligning it with the current spending dynamics of rural households.
Evolving Urban Spending Trends and Their Alignment with Current CPI Weights
The table below illustrates the evolving spending patterns of urban households across various survey rounds since 1999-2000, mapped against the current Consumer Price Index for Urban (CPI-U) weights derived from the 2011-12 survey.

Column 3 displays the existing CPI-U weights currently used for estimating urban inflation, while Columns 4 to 9 present the distribution of household spending across different commodity categories from multiple survey rounds. It is evident that the present CPI-U weights approximately mirror the consumption patterns from the 68th survey round conducted in 2011-12. However, the spending behavior captured in the 2022-23 and 2023-24 surveys shows significant deviations from these outdated weights, reflecting shifts in rural consumption priorities.
In the subsequent analysis, we will use the latest data from Columns 8 and 9 to recalibrate the urban CPI weights. This updated framework will allow us to estimate rural inflation more accurately, aligning it with the current spending dynamics of urban households.
Calculating Updated Rural, Urban, and Combined Weights Based on Current Spending Patterns
Using the data from the table below, we can now estimate updated CPI weights for rural, urban, and combined categories. These recalculated weights will provide a more accurate measure of inflation by reflecting the latest household spending trends.

For Rural and Urban weights, we calculate the average of the spending pattern data from the 2022-23 and 2023-24 survey results. This averaging smooths out year-on-year variations and gives a more stable estimate of current consumption behavior.
However, estimating the Combined Weights for both rural and urban categories requires a more precise approach. To achieve this, we calculate a weighted average of rural and urban weights, anchored to their respective Monthly Per Capita Expenditure (MPCE) values – listed in columns 4 to 7. This method ensures that the combined weights accurately reflect the proportional spending power of rural and urban populations.
In the provided table:
- Column 14 represents the average rural weights, derived from the mean of Columns 8 and 9 (2022-23 and 2023-24 rural data).
- Column 15 shows the average urban weights, calculated from Columns 10 and 11 (2022-23 and 2023-24 urban data).
- Column 16 presents the combined weights, computed as a weighted average of rural and urban weights, factoring in their respective MPCE values.
This calibration of weights forms the foundation for recalculating India’s inflation more accurately, reflecting the latest consumption dynamics across rural and urban households.
Estimating Inflation Using Updated Weights Reflecting Current Spending Patterns
With the newly estimated weights based on current spending patterns, we can now calculate India’s inflation more accurately. To achieve this, we need to compute the General Index for all three dimensions—Rural, Urban, and Combined.
Since we already have the updated category-wise weights and their corresponding price indices, we can calculate the General Index by taking the sum product of these weights and their respective indices for each dimension. This method is effective because while the price indices for individual items remain unchanged, updating the weights alters the aggregated General Index to reflect current consumption trends.
By recalibrating the General Index for each category over the past 24 months, we can compute the inflation rates for rural, urban, and combined segments for recent months. These results can then be compared with the inflation estimates derived from the outdated 2011-12 spending patterns, highlighting the impact of evolving consumption behavior on inflation measurement.
The following charts provide a snapshot of the estimated combined inflation trends calculated using these updated weights.

To help readers easily evaluate the changes in inflation estimates, I have embedded a dashboard below that uses the original 2011-12 weights for direct comparison with the updated figures.

By comparing the two charts above, it is evident that inflation figures calculated using the revised weights are slightly lower—by approximately 50 to 75 basis points—compared to those based on the 2011-12 spending pattern. A significant driver of this difference is the “Vegetables” category, which has been a major contributor to India’s recent inflation. The spending weight on vegetables has declined from 6.04% in 2011-12 to 4.76% in the latest data. Similar shifts can be observed across other categories, reflecting evolving consumption trends.
It is important to note that this analysis is purely indicative and does not claim to be fully accurate. I do not have access to the exact methodology and detailed item-level classifications that the Ministry uses to determine official CPI weights. However, this exercise offers a reasonable perspective on how inflation, as a metric, can become outdated and why it is crucial to revise the CPI base to reflect current spending patterns, as highlighted by the latest survey findings.
Conclusion: Revising India’s Inflation Measurement Is Now Due
The evidence is clear—India’s method of measuring inflation is overdue for revision. The current Consumer Price Index (CPI) weights, based on spending patterns from 2011-12, no longer capture the evolving consumption habits of Indian households. Significant shifts in expenditure, particularly in categories like vegetables, prepared foods, and household goods, highlight a growing disconnect between official inflation figures and the real cost-of-living pressures faced by millions.
Persistently high inflation continues to strain the economy, limiting the Reserve Bank of India’s ability to lower interest rates and stimulate growth. This misalignment between outdated inflation metrics and current spending patterns risks misinforming economic policies, further deepening financial hardships for ordinary citizens.
While this analysis is indicative, it underscores a critical point: the framework for calculating inflation must evolve with the economy it aims to measure. Revising the CPI base year and updating the weighting system to reflect current consumption trends is no longer optional—it is necessary. Accurate inflation data is essential for designing effective policies that promote sustainable growth, safeguard jobs, and protect households from rising prices.
The need for recalibration is clear. Updating India’s inflation measurement framework will ensure that economic decisions are informed by today’s realities, leading to more targeted and impactful policy interventions. The time for this revision is not in the future—it is now.