Present CPI aggregation method raises issues for monetary policy: RBI paper

Rebasing CPI necessary to make index relevant to present consumption patterns

The method used by the National Statistics Office at present to aggregate the Consumer Price Index at times presents challenges for the conduct of monetary policy as the inflation captured by the index reflects data distortions, Reserve Bank of India staff wrote.

“The present method of horizontal aggregation of CPI, across sectors and States/UTs for all-India item level indices as well as for indices at sub-group/ group and overall, at times creates challenges for use of the index for monetary policy since the inflation based on it reflects, in addition to changes in prices of goods and services, data kinks