The Bangladesh Bureau of Statistics calculates the overall inflation based on the consumption basket created in 2005, which does not reflect the current consumption pattern, said the Centre for Policy Dialogue.
To portray the actual picture of inflation, the think tank suggested changing the consumption basket.
At a webinar on the latest monetary policy for FY2021-22, CPD Executive Director Fahmida Khatun said the calculation of inflation was flawed.
The cost of living has increased and people's purchasing capacity shrunk, she said.
"If we analyse purchasing capacity and living standards, we see that medical care and health expenses have increased manifold from 2012 to 2021," she said.
According to the Consumer Price Index, expenditure doubled on the back of rising healthcare cost, house rent and transportation cost, while people's income declined during the pandemic.
One of the many significant tasks of the Bangladesh Bank is to keep inflation under control, Fahmida said, adding that though inflation was in check, living expenditure skyrocketed.
There is no correlation between inflation and living expenditure, she said.
When incomes go up, the share of earnings spent on food falls. During 2010-16 Bangladesh's low-income households saw their income rise by 7.7% while the annual increase in real household income was 0.16%, Fahmida said.
According to statistics, food expenditure dropped from 2010 to 2016. But since people's consumption pattern has changed, the current inflation does not bring forth the real scenario of people's living cost.
Prof Shamsul Alam, state minister for planning, acknowledged the flaws in inflation calculation.
"Our economy has changed so much that the real picture of inflation cannot be derived from the base set so long ago," he said, adding that the government would discuss the matter with the people concerned to address it soon.