The Consumer Price Index (CPI), calculated by the Ministry of Statistics and Programme Implementation (MoSPI), tracks the average price change of essential goods and services in a consumer’s basket. This basket represents an average consumer’s spending patterns, with different weights assigned to various products. As of October 2024, the year-on-year inflation rate for the All-India CPI (Base 2012) was 6.21%, with rural and urban inflation rates at 6.68% and 5.62%, respectively. Food inflation was notably higher, reaching 10.69% in rural areas and 11.09% in urban areas.
However, the CPI often fails to capture the economic realities of lower-income households. It assigns weights of ~6 to vegetables and ~11 to pulses and cereals, reflecting an average-income consumer’s basket. For low-income groups, food expenses account for a significantly higher proportion of income. For example, the share of meal costs in total wages for casual workers rose sharply: by 12.9 percentage points for women (34.7% to 47.6%) and 8.8 points for men (22.6% to 31.4%). Among salaried workers, meal costs increased by 6 percentage points for women (from 16% to 22%) and 4.9 points for men (from 12.6% to 17.5%). These trends reveal the CPI’s limitations in accurately reflecting consumption patterns for all kinds of groups in an economy.
The rising cost of meals has profound implications. Recent data shows the price of a basic meal, or “thali”, has increased by 52%, compared to just a 9-10% wage increase for casual and regular workers. This disparity may lead to a rise in malnutrition and multidimensional poverty. For instance, school mid-day meals are shrinking in both size and nutritional quality due to rising costs that outpace the support provided by the government to the schools.
Staple vegetables like tomatoes, onions, and potatoes (TOP) have experienced drastic price increases of 247%, 51%, and 180%, respectively. These hikes are driven by short seasonal crop cycles, storage constraints, supply-demand imbalances, and regional production concentration, making supply chains highly vulnerable to weather events and logistical challenges.
On the supply side; 40% of food is lost before reaching consumers due to poor transportation and storage infrastructure, while 10% is wasted at the consumption stage. Promoting circularity in agriculture can help address these inefficiencies effectively. Strategies such as product-as-a-service models to optimise farm-level asset use, food recovery, recycling systems, innovations to extend food lifespan, and repurposing agricultural waste could transform the sector. These can help reduce the supply-demand gap and reduce the volatility of prices fostering a more sustainable and equitable agricultural system. Additionally, these measures could yield annual benefits of $61 billion by 2050.
On the demand side; consumption and spending habits are dependent on the income level, so a progressive increment must be undertaken rather than a regressive approach. Hence, essential goods should not become inaccessible or treated as luxuries. Instead, a collective effort is required to ensure that necessities remain a fundamental right for everyone.
