Inflation calculation in India may soon witness a significant transformation, with indications from the Household Consumption Expenditure Survey (HCES). The formula for determining inflation involves an inflation basket, comprising various products whose prices contribute to the inflation rate calculation. However, adjustments are being considered as some products in the basket are no longer in current trends.
Media reports suggest efforts to remove outdated products from the basket while introducing items reflecting current consumer spending habits. Examples include the inclusion of products like VR, CDs, DVDs, and the exclusion of products less popular in today’s consumption patterns. Notably, people are now spending significant amounts on podcasts and streaming services.
Impact on Prices
The Household Consumption Expenditure Survey report introduces several new products, including expenses on mobile recharge, first or second-hand purchases, repair and maintenance, spending on streaming services like Netflix and Amazon Prime, e-books, audio books, and online learning courses. New products like power banks, hair dryers, straighteners, curlers, trimmers, grooming tools, headphones, earphones, ear pods, Bluetooth devices, speakers, and sanitizers, deemed essential post-COVID, are also considered in this survey. It is believed that incorporating these changes will aid in a more relative calculation of inflation, presenting accurate data to the public.
How Inflation is Calculated in India
The calculation of inflation rate in India involves the use of a crucial technique known as the Return Rate or Inflation Rate formula. This formula is employed to determine the inflation rate, although different countries may use distinct formulas for this purpose.
