Consumer Price Inflation (CPI) distils wide-ranging inflation rates of multiple items into a single number. This can possibly mask higher or lower inflation in certain items.
Prices are on the boil again
Inflation is now hovering near 7%.
Consumption pattern determines inflation figures of households
Higher rural spend on food and beverages props up its weight in combined CPI when typical urban household spends much lower as % of its total basket. Further, housing accounts for a chunk of urban household’s spends yet gets lower weightage in headline CPI due to its absence in rural basket.
It is pertinent to note that the basket of items and their weighing are based on data of Consumer Expenditure. Survey (CES) of 2011-12. Figures have not been updated since to reflect change in consumption patterns. This may result in vastly underestimated or overestimated inflation.