Do India's statisticians believe that the Indian citizen is becoming increasingly vain, hedonistic and imprudent? An analysis of the new inflation index indicates they do. It's not their fault. They have inferred those characteristics from the way Indians spend. Let's see how.
Last week, the Ministry of Statistics and Programme Implementation (MosPI) released the first Consumer Price Inflation (CPI) number that uses 2024 as the base year, replacing the previous series with 2012 as the base year. January 2026 inflation clocked at a healthy 2.75%, slightly above the floor level that the Reserve Bank of India likes it to be and well below the ceiling when the governor starts frowning. The number itself is transient and hence not critical to this analysis. though it deepens the story. What offers a clue into the statisticians' thinking is the weightage assigned to each of the goods and services that are measured to build the index.
Changing Consumption Trends
It is necessary to change the building blocks of the CPI periodically to reflect changing consumer choices. The previous index, which was built on patterns of 2012, had six groups and included then widely used items such as video and audio cassettes, used clothing and rope. The new index removes such stuff and brings in now-common services such as video streaming and babysitters. Its 12 divisions of goods and services are selected on the basis of Classification of Individual Consumption According to Purpose (COICOP), a principle laid down by the United Nations' Statistical Division in 2018.
COICOP keeps pace with changing consumption patterns and helps sketch a more accurate profile of the consumer. MoSPI statisticians have relied on the Household Consumption Expenditure Survey (HCES) of 2023-24 to imagine the new Indian CPI basket based on consumer choices.
A nation climbing out of widespread poverty while harbouring ambitions of becoming a superpower would be expected to spend more on superior foods, education and asset creation. But the weightage for food, education, sports, recreation and culture is sharply lower, indicating a relatively lower consumer preference for them. Instead, the higher weightage for personal care, transport and intoxicants draws the picture of a consumer with a YOLO (you-only-live-once) approach.
Rural-Urban Divide
The HCES 2023-24, released in December 2024, showed that food expenditure in rural areas fell below half of households' average monthly spending. In the food basket, the sharpest spike was in the consumption of beverages, refreshments and processed foods instead of proteins, fruits and vegetables. The trend was the same in rural as well as urban areas. Similarly, the share of expenditure on education saw a drop in both rural and urban areas, while that of conveyance, entertainment and intoxicants shifted up.
The breakup accompanying the new CPI series shows the deepening of the trend. Personal care, social protection and miscellaneous goods and services jumped by 19.02%. The next fastest price rise was for education at 3.35%.
One reason for low household food expenditure is the free and highly subsidised distribution of essentials such as cereals, pulses and sugar to over 800 million Indians. That should logically free up household budgets for judicious expenditure, such as on education and protein-rich foods. That does not seem to be the case. For instance, India has high internet penetration but low ownership of personal computers, crucial for upgrading knowledge and acquiring skills such as programming. Instead, internet connectivity is largely deployed to consume entertainment content on mobile phones.
The 'Middle Class' Factor
Consumption behaviour in India is also skewed by inequality, and weightages in the new CPI series appear to tilt towards middle-class consumption, even though most of India can hardly be categorised as that. A report of broking firm CLSA from November 2025, which slices the country by per capita income, found that 90% of Indians survive on $900 annually, while the average national annual per capita income is a respectable $2,400. The Rupee Road report, prepared from the perspective of identifying equity investment opportunities, says that, measured by affordability, shopping by the poorer cohorts rarely goes beyond basic essentials.
And incomes are not rising enough to beat inflation. Analysing jobs data, Niti Ayog member Arvind Virmani had remarked last year that salaries had not kept pace with inflation in the past seven years. Real wages were stagnant even though the number of jobs was rising faster than the population growth rate, Virmani had said. He, however, pointed out that the wages of casual workers had done better.
Considering that the CPI is a key metric influencing fiscal and monetary policies, the new series is likely to absorb the sentiments of the middle-class Indian consumer who shops on e-commerce platforms and prefers to stream movies at home. Incidentally, one of the sharpest rises is in the prices of home improvements and furnishings.
The new CPI tells the story of the aspirational Indian consumer who only lives once.
(Dinesh Narayanan is a Delhi-based journalist and author of 'The RSS And The Making Of The Deep Nation'.)
Disclaimer: These are the personal opinions of the author
