The process of formation of sugar or carbohydrate by plants is known as photosynthesis.
It occurs in presence of light so the term "photo"
Here the plant uses carbon dioxide and it reacts with water to given glucose
The general reaction will be
6CO2(g) + 6H2O(g) + sunlight ---> C6H12O6 + 6O2
Thus the carbon dioxide is being converted to glucose
Higher the rate of absorption of carbon dioxide by plant more the rate of formation of glucose or more the rate of photosynthesis by the plant
The formation of glucose from carbon dioxide is a metabolic pathway which is a cycle known as Calvin cycle. Here actually the carbon is fixed into useful carbohydrates and this pathway is light independent.
Hence
Carbon dioxide absorption is an appropriate indicator of photosynthesis because the main part of photosynthesis if fixation of carbon dioxide into useful carbohydrates by Calvin cycle (occurs in chloroplast of plant cells)