The Consumer Price Index (CPI), which serves as an inflation yardstick for policy-making in India, is a rough approximation of the consumption basket for a person earning a per capita income of about 1.5 ₹ lakh per year. Food, naturally, dominates the basket and the government uses a plethora of devices to control prices – from subsidized agriculture to food price volatility. Other elements of this basket, such as fuel and housing, receive their share of attention, although the intervention is not as widespread. The prices of services such as health, education and transport are also controlled by state procurement.

This consumption basket changes rapidly as income levels rise, and the weights assigned to each category in the CPI become irrelevant for the top decile of the population. For an individual earning ₹1 crore per year, the CPI ceases to matter as a barometer of inflation. The rate of price increases for this segment of housing, education, health and leisure is more than three times that to which the “ordinary” Indian is subject. These low-key consumer items for the wealthy include corporate health care, Ivy League education, upscale condominium living, high-end restaurants, and overseas vacations. Market forces are at their best here, unfettered and elastic, and prices tend to rise faster.

Then there is conspicuous consumption. Designer handbags and excessively aged Scotch whiskey belong to a category of products that have no correlation with the cost of production. The demand for Veblen goods – named after Thorstein Veblen who identified this effect on consumption – increases with price. Luxury products tend to push back the price frontier, but their inflationary effects are swept away by tiny consumption. India, by some accounts, has three-quarters of a million dollar millionaires. Yet their expenses do not show up in expected places like luxury homes and cars. This could be an indicator of how fast prices are rising in the basket of goods and services consumed by the wealthy in India.