How inflation is measured in India

When the news says “inflation is 5%”, it means prices on average are 5% higher than in the same month a year earlier. That single number comes from a price index — and India publishes more than one.

The Consumer Price Index

The headline measure is the Consumer Price Index, published every month by the National Statistics Office. Price collectors record the prices of a fixed basket of goods and services — food, fuel, clothing, housing, transport, education, health care and more — in markets across rural and urban India. Each item is weighted by how much households spend on it, according to consumption surveys. Food carries a large weight, which is why vegetable prices can move the headline number so much.

The Wholesale Price Index

The Wholesale Price Index, compiled by the Office of the Economic Adviser in the Ministry of Commerce and Industry, tracks prices of goods traded in bulk — it does not include services. It often moves differently from the CPI and is watched as an early sign of costs for businesses.

Core inflation

Economists also look at core inflation, which strips out food and fuel because their prices jump around with the weather and world oil markets. Core shows the underlying trend.

The RBI’s target

Since 2016, the law has given the Reserve Bank of India a target for CPI inflation, set by the government in consultation with the RBI: 4%, with a tolerance band from 2% to 6%. In March 2026 the government kept that target for another five years, to March 2031. The Monetary Policy Committee sets the repo rate to hit it. If inflation stays outside the band for three quarters in a row, the RBI must write to the government explaining why and what it will do.

Why your inflation is different

• Your basket is not the average basket. A family paying school fees and rent feels different increases from one that owns its home.
• Base effects. Because inflation compares with a year earlier, an unusually low or high price last year can make this year’s rate look high or low.
• Prices can stay high even when inflation falls. Lower inflation means prices are rising more slowly, not that they are coming down — that would be deflation.

See what inflation does to your money with our inflation calculator. More: All guides