About three decades ago, when I learned about the Consumer Price Index (CPI) — that reflects changes in the retail prices of selected goods and services on which a homogeneous group of consumers spends a major part of their income — my immediate query was about how the ‘basket’ of commodities and their weights are selected. Are they constructed in some objective way, say, by some well-defined survey on income and consumption? Or do they mostly depend on the ‘wisdom’ of a few experts?
Another important concern is that while the CPI corresponds to a “common man”, nobody knows who that common man is. Should we put a piece of imported chocolate, say, in the basket in the perspective of today’s India? And what should be its size? Well, as the consumption pattern widely varies across different economic classes, different CPIs may help understand how different economic layers of the society are affected by the increasing cost of commodities.
