Informist, Tuesday, Mar 21, 2023
NEW DELHI – The government should expedite efforts to conduct a new consumer expenditure survey to come out with a new CPI series and make the CPI consumption basket more relevant to the current household consumption behaviour, the Reserve Bank of India staff said in a paper today.
The government had launched the Household Consumption Expenditure Survey in July to collect disaggregated level information from households on the consumption of food and non-food items.
The consumer expenditure survey is crucial to change the base year of the CPI series. The base year of the current series is 2012, which is based on the consumption expenditure survey carried out in 2011-12.
Though a nationwide sample survey was carried out in 2017-18, its results were junked by the National Statistical Office, citing issues with data quality.
Timely base revision with synchronous consumer expenditure survey, price, and market survey every five years can address the concerns of policymakers, the RBI staff said in the paper.
"The market survey to identify shops for collecting prices is even older," said the staff paper, authored by Praggya Das and Asish Thomas George from RBI's Monetary Policy Department.
The views expressed in the article are those of the authors and do not represent the views of the central bank, the RBI said.
On the compilation method of the CPI, the paper said the present methods of aggregation of CPI for item level indices and all-India level at times make the assessment of prices and its forecast a "challenge".
In case the NSO arrives at all-India item level indices through sector and state-level aggregation and then does the aggregation of the all-India item indices into higher-level aggregates, the aggregation methodology could be reconciled between published sub-group level indices and item level aggregation, the paper said.
This aggregation method will be in conformity with international standards, it said.
The Technical Advisory Committee on Statistics of Prices and Cost of Living, which guides the NSO on preparation of CPI, may consider a change in the aggregation method to make the index more usable for policy analysis, the paper said.
At present, there is no guidance on proper treatment of zero prices – such as in the recent period when PDS prices were slashed to zero – in the NSO's CPI manual. "Drawing from international practices, such cases may be considered as zero-prices and not missing prices," the paper said.
The CPI print for January had led to confusion, as the sharp increase in the cereals indices, on a month-on-month basis, was not borne out by the movement in the constituents of the group.
When PDS wheat and rice prices were made available for free in certain states, the weights of such zero-priced items were apparently redistributed across the closest category in CPI in those states, implying higher weightage to non-PDS or open market prices, the paper said.
"In a scenario of sharp increase in open market wheat and rice prices, cereal inflation is those states may have got further accentuated," it said. End
Reported by Priyansh Verma
Edited by Avishek Dutta
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Informist, Tuesday, Mar 21, 2023
NEW DELHI – The government should expedite efforts to conduct a new consumer expenditure survey to come out with a new CPI series and make the CPI consumption basket more relevant to the current household consumption behaviour, the Reserve Bank of India staff said in a paper today.
The government had launched the Household Consumption Expenditure Survey in July to collect disaggregated level information from households on the consumption of food and non-food items.
The consumer expenditure survey is crucial to change the base year of the CPI series. The base year of the current series is 2012, which is based on the consumption expenditure survey carried out in 2011-12.
Though a nationwide sample survey was carried out in 2017-18, its results were junked by the National Statistical Office, citing issues with data quality.
Timely base revision with synchronous consumer expenditure survey, price, and market survey every five years can address the concerns of policymakers, the RBI staff said in the paper.
"The market survey to identify shops for collecting prices is even older," said the staff paper, authored by Praggya Das and Asish Thomas George from RBI's Monetary Policy Department.
The views expressed in the article are those of the authors and do not represent the views of the central bank, the RBI said.
On the compilation method of the CPI, the paper said the present methods of aggregation of CPI for item level indices and all-India level at times make the assessment of prices and its forecast a "challenge".
In case the NSO arrives at all-India item level indices through sector and state-level aggregation and then does the aggregation of the all-India item indices into higher-level aggregates, the aggregation methodology could be reconciled between published sub-group level indices and item level aggregation, the paper said.
This aggregation method will be in conformity with international standards, it said.
The Technical Advisory Committee on Statistics of Prices and Cost of Living, which guides the NSO on preparation of CPI, may consider a change in the aggregation method to make the index more usable for policy analysis, the paper said.
At present, there is no guidance on proper treatment of zero prices – such as in the recent period when PDS prices were slashed to zero – in the NSO's CPI manual. "Drawing from international practices, such cases may be considered as zero-prices and not missing prices," the paper said.
The CPI print for January had led to confusion, as the sharp increase in the cereals indices, on a month-on-month basis, was not borne out by the movement in the constituents of the group.
When PDS wheat and rice prices were made available for free in certain states, the weights of such zero-priced items were apparently redistributed across the closest category in CPI in those states, implying higher weightage to non-PDS or open market prices, the paper said.
"In a scenario of sharp increase in open market wheat and rice prices, cereal inflation is those states may have got further accentuated," it said. End
Reported by Priyansh Verma
Edited by Avishek Dutta
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
