Basket of commodities

Indian Economy glossary

Also called: Consumption basket, Weighting diagram · Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Class 11, Ch 7 "Index Numbers"

Meaning

A basket of commodities is a fixed, representative list of goods and services, in set quantities, that a price index prices over time. The basket is held constant, so any change in its cost reflects only price change. It must match the group it represents: a farm labourer's basket is mostly food, while an official's basket includes cars and travel. For India's CPI, the basket's weights come from household consumption expenditure surveys.

Example

The CPI-Combined 2012 series drew its weights from the 2011-12 consumption survey (68th NSS round). Food and beverages got 45.86, housing 10.07, fuel and light 6.84, and miscellaneous 28.32. The new 2024-base series uses HCES 2022-24, with a lower share for food.

Don't confuse with

  • Base year: the year whose prices anchor the comparison (index = 100). The basket is what is priced; the base year is when it is valued at 100. Both are updated during base revision.

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