Revision of the inflation gauge: Handle with care

India's consumer price index should be revised on the basis of the latest survey of household consumption expenditure, but with nuances of the country's situation kept well in mind

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The remarkable insights into the changing pattern of household consumption thrown up by the latest Household Consumption Expenditure Survey (HCES) 2023-24 are of special relevance for a wide range of policy decisions. Take, for instance, an issue that seemed to have become a bone of contention between the government and the Reserve Bank of India (RBI): the role and relevance of food inflation in computing consumer-price inflation and hence in formulating monetary policy. In recent months, Union ministers have expressed qualms over RBI's apparent unwillingness to look through inflation driven by food prices in its formulation of monetary policy. Commerce minister Piyush Goyal called for a rate cut, saying that in his personal view, it was a flawed approach to consider food inflation. This was followed by finance minister Nirmala Sitharaman speaking of the need for reduced policy rates. In December, the central bank under former governor Shaktikanta Das held rates steady on the grounds of what economists call the 'second-order' (or spillov