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Inflation index renewed to show new lifestyles

business Updated: Feb 08, 2011 01:07 IST
HT Correspondent
HT Correspondent
Hindustan Times
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In a move that could better reflect actual changes in cost of living while measuring inflation, the government on Monday unveiled a national consumer price index (CPI) that incorporates the price of several key services including telephone bills, education and recreation to mirror current lifestyles.

The statistics and programme implementation ministry released the methodology of the new CPI that will come into effect for the prices of January. The base for the new series will temporarily have calendar 2010 as the base year, which will be shifted to 2011-12 once the 68th round of consumer expenditure survey is completed. Data is being collected from 1,183 villages and 310 towns across India.

The government said the new consumer price series for rural, urban and combined for January, reflecting the impact of price rise on common man, will be released on February 18.

Work for a comprehensive CPI started in 2008 when the country saw an inflationary surge as measured by WPI.

The finance ministry instructed the statistics ministry to hasten the process for releasing an all-India CPI as it was of the view that WPI-based inflation overstated the level of the price rise in the economy.

The present four CPI numbers do not encompass all the segments of the population and as such they "do not reflect the true picture of the price behaviour in the country," chief statistician T C A Anant said.

"It is, therefore, necessary to compile a CPI which takes into account the consumption patterns of all segments of the population," he said on the sidelines of the 15th conference of commonwealth statisticians here.

The government proposes to release provisional indices for a period of one year. "These provisional numbers will be subsequently revised and final numbers with complete data for all-India and also for all the state and Union Territories would be released with a time lag of two months," Anant said.

Central banks rely mostly on CPI data to decide monetary policy, unlike RBI, which uses WPI as the key inflation index.

In a 2009 report of a committee on financial sector assessment, chaired by then RBI deputy governor Rakesh Mohan, said: "Relying on a single index might result in loss of information on some crucial sectors and might be less useful in tackling the diversity of issues."