It is frequently asserted that the consumer price index (CPI), which is based on the household consumption expenditure survey of 2011–12, gives food and beverage goods an outmoded priority, which is the cause of the present increase in the retail price inflation rate.
This is demonstrated by the fact that in July, the overall rate for food goods was 1.36 percent in deflation, despite the fact that wholesale price inflation climbed more quickly than retail price inflation in July, 14.25 percent vs 11.51 percent. The latter saw inflation of 7.44 percent, in contrast.
This was as a result of the fact that while food items made up 39.06% of the consumer price index (CPI), they only made up 15.26% of the wholesale pricing index (WPI). The weight of food products in the CPI is 45.86% when combined with beverage weights.
The argument for suitable weights for food and beverage goods cannot be made solely in light of the current environment because, during periods of low food and beverage inflation, it also unnecessarily slowed down the overall rate of retail inflation.
After its debut in the base year of 2010, based on the consumption expenditure survey of 2009–2010, the consumer price index was only reviewed once. The current index is based on the base year of 2012, when food and beverage weights were changed from 47.58% in CPI to 45.86%. This stated that the weights given in the CPI broadly represent the composition as of 2011-12, which is what is utilized now. The weights used in the CPI should reflect the consumption pattern of the population of any country. Thus, in this case, the weight of 46% is appropriate.