With the rise in spending on durable goods and discretionary products in the urban and rural markets in the country, experts have suggested a revision of the Consumer Price Index (CPI).

According to the household consumption expenditure survey 2022-23 released by the union government, the Monthly Per Capita Consumption Expenditure (MPCE) composition for durable goods in the rural market increased from 4.85 per cent in 2011-12 to 6.89 per cent in 2022-23 while the urban markets saw growth from 5.60 per cent in 2011-12 to 7.17 per cent in 2022-23.

“Real per capita income has increased 1.5 times since 2011-12 and has been growing at a CAGR of 4 per cent. High income increases the propensity to spend on luxury goods, and the rising spending on durable goods in the HCE survey points to a shift in consumption patterns in rural and urban areas. This is crucial from the perspective that our CPI basket may need to be revised.

Given that core prices have been trending down since May 2023, it also means that if weights assigned to “food items” in the CPI basket were to be revised down, inflation in our economy would likely be much lower than what CPI is currently pointing to. This would also help the RBI to pause for longer or even ease the monetary policy sooner. However, revising the CPI basket may take some time, but RBI has enough information to take prudent calls in the upcoming MPC meetings,” said Rumki Majumdar, Economist, Deloitte India.

Companies have pointed out that the increase in disposable income will further lead to an increase in consumer spending on durable goods.

“The growth will continue in the urban sector for consumer durable due to various factors like an increase in disposable income.

One of the most attributing factors for this growth has been easy access to credit facilities, Consumers have started buying expensive gadgets at easy EMI’s there is an adoption of more than 70-75 per cent on products more than seventy thousand. There will be more purchasing power with consumers. Technological advancement in urban sector consumers are influenced by innovations they don’t hesitate to buy as it has become a trend, especially among millennials and Gen Z,” said Avneet Singh Marwah CEO of SPPL Exclusive brand licensee of Thomson in India.

However, appliances have witnessed a drop in the rural market. “Consumer durable sector definition that is a quite widespread sector. It is not especially for appliances. In the appliances, our report does not show growth in rural as an industry level, there has been a degrowth of about five to six per cent in the rural market this year,” said Kamal Nandi, Business Head and Executive Vice-President at Godrej Appliances.