Forecasting inflation in a digital economy

Abstract

The measuring of official statistics has been made more difficult in recent years by the growth of the digital economy. The Consumer Price Index (CPI), which measures inflation dynamics, has had to adjust to reflect changing consumption patterns, including the rise of new consumer goods and services and the popularity of online shopping. As e-commerce plays an increasingly significant part in the retail environment, new goods and services are being added to the CPI basket and collecting methods are being adjusted to reflect the dynamic purchasing behaviour. In this analysis we will see how CPI is calculated in India and how it is different from US. We will also discuss about the basket definition and items which should be monitored very closely.