New Delhi, April 20 -- Ordinary people do not track price indices-they gauge inflation by what happens to their daily expenses. When households are asked to assign a number to current or future inflation, their responses are shaped by recent movements in the prices of everyday items.

This creates a gap between "felt" inflation-the inflation households perceive-and official inflation measured by the Consumer Price Index (CPI).

Some have argued that this divergence was partly due to an outdated price index. But the new CPI, with improved coverage, updated component weights and a 2024 base year, has not materially narrowed the gap. Households continue to estimate inflation 4-6% higher than the official rate.

This persistent upward bias is...