Revamping Inflation Measurement in India
India is embarking on a significant change in how it measures inflation, aiming to make the process more relevant in today's digital economy. The Ministry of Statistics and Programme Implementation has announced plans to source price data directly from major e-commerce platforms like Amazon and Flipkart. This initiative responds to the growing trend of online shopping and intends to capture the shifting consumption habits of Indian households.
As of 2024, India is projected to have around 27 crore online shoppers, with this number expected to grow by 22% annually. The statistics ministry is collecting price information from 12 major cities with populations exceeding 2.5 million. By integrating these online prices into the Consumer Price Index (CPI), the government aims to ensure that the inflation measure is both timely and representative of actual spending practices.
Saurabh Garg, secretary of the Ministry, emphasized that the inclusion of e-commerce data is crucial as a significant portion of household expenditure now goes toward online purchases. The new CPI series, expected to be released early next year, will also reflect changes in weightages and incorporate data on airfares and streaming services, which have become dominant in consumer spending.
This shift aligns India with global practices, as many countries have already started including online prices in their inflation metrics. By having e-commerce companies share weekly average prices, the government can cross-check this data against a broader dataset, ensuring accuracy and mitigating any potential biases.
Furthermore, this overhaul of the CPI is part of a larger effort to enhance statistical measures in India. Earlier this year, the statistics ministry launched an investment survey and initiated more frequent employment reports, expanding the sample size for these surveys to improve precision. Garg noted that these efforts aim to provide reliable data for informed decision-making.
In addition to the CPI updates, a new Index of Services Production is being designed to offer quarterly insights into the services sector, which constitutes more than half of India’s GDP but is less frequently monitored compared to manufacturing. This new index is likely to be rolled out in the middle of next year, marking another step toward more reliable economic metrics.
