The following problems are faced in the construction of index number:
1. Definition of the purpose : There is no fixed purpose of an index number as every index number has its own particular uses and limitations. Hence, it is important to know what is to be measured and how these measures are to be used.

2. Selection of the base period : When comparison is to be made between different time periods or different places some points of references is to be identified, this is called the base year. This base year should not be too for or too distent. It should be free from all sorts of abnormalities or irregular fluctuations like earthquakes, floods, tsunamis etc.

3. Selection of items : Collection of data is the main problem in constructing index number, as there is a large variety of goods and prices. If the number of the commodities is too large, a choice of some representative items has to be made. On the other hand, inclusion of too few items would make the index number unrepresentative of the whole. Hence, items should be selected as per the relevance of the index. The number of items to be included in the index should neither be too small or to be large.