'Your salary hike is based on horse cart rides': Middle class ignored in CPI index, says IIM grad

The Consumer Price Index still tracks horse cart rides and audio cassettes — and that’s what your salary hike is based on.

In a LinkedIn post, Lokesh Ahuja, an IIM Mumbai alumnus, sharply criticized India’s official inflation metric for being out of sync with how the country’s urban middle class actually lives and spends.

“Your salary hike is based on horse cart fares,” Ahuja wrote, pointing to the outdated components of the Consumer Price Index (CPI), which still includes obsolete items. 

“But the real issue? It doesn’t reflect how the urban middle class actually spends.”

The CPI, published by the Ministry of Statistics, drives critical decisions — from interest rates and salary hikes to government policy. Yet its expenditure weights haven’t kept pace with economic reality. Currently, food and beverages make up 46% of the index, while housing gets 10%, and health and education just 6% each.

Ahuja contrasts this with actual middle-class spending patterns, where rent and EMIs can consume 25–30% of income, school fees rise annually, insurance premiums are up 20–25%, and essential urban expenses — mobile bills, daycare, transport — are barely acknowledged.

While CPI inflation currently sits at 2.1%, many households continue to feel squeezed. “Because the things we spend on aren’t the things CPI tracks closely,” Ahuja wrote.

He also noted that India already uses more accurate inflation measures for certain groups. CPI-IW and CPI-AL — maintained by the Labour Bureau — shape dearness allowance for public sector workers and rural wage policy. But the heavily taxed, lightly subsidised middle class remains without a tailored index.

The CPI basket is expected to see an overhaul with the base year shifting from 2012 to 2024. Using fresh data from the 2023–24 Household Consumption Expenditure Survey, the update is expected to better reflect modern spending — with food’s share likely to fall and services and other consumer costs gaining weight.

The revamped CPI series is set to launch in late 2025 or early 2026, and the basket could expand from 299 to roughly 400 items.

Still, Ahuja warns against relying on a single national figure. “Stop relying on a single number to measure the wellbeing of 1.4 billion people,” he wrote. “In a country this large and diverse, a single number will always miss someone.”