The government has expanded the scope of the year-long “market surveys” that began in January to re-identify the items that Indian people consume most frequently as it targets to re-constitute the consumer price index (CPI). According to official sources, the expansion is twofold – the ministry of statistics will hold the surveys in as many as 2,860 representative physical markets, up from under 2,000 in the last exercise conducted in 2011-12, and the new index could comprise over 320 items, compared with 299 in the extant one.
While the survey will conclude in December 2024, the release of the new CPI will take another few months.
The change in the CPI is crucial as under the “flexible inflation-targeting” mechanism adopted by the Reserve Bank of India in 2015, the retail inflation is to be kept in the range of 4+/-2%; the RBI, as stated by the governor recently, is determined to ensure “the descent of consumer price inflation to the target of 4%” and retain that level on a durable basis.
“The market survey’s purpose is to select which product of a certain category is being purchased the most by consumers from a particular market,” an official said. “Once ascertained, that product would become part of the CPI basket, and its price level would be tracked on a monthly basis for constituting the CPI,” the official said.
Also, several new items, mainly in the category of entertainment, conveyance, durable goods, processed food, would be added to the index, the official said. However, many items, currently in the CPI basket, would not feature in the new series, such as VCR/VCD/DVD player, audio or video cassette etc. as these are no loner consumed or frequently bought, while the new series would likely include LED TVs, smart phones, charges on OTT, conveyance using services of tax aggregators etc.
The market survey is being conducted in parallel to the second round of the Household Consumption Expenditure Survey (HCES), set to be concluded in July 2024. Once the results of both the surveys are compiled, the CPI will be revamped, and a new CPI series will be constituted.
The first round, or HCES 2022-23, revealed that households are now spending more on non-discretionary items as compared to 2011-12 levels. It also showed that the expenditure on food items have not dropped as drastically, as many expected.
“The questionnaire used in HCES:2011-12 (NSS 68th round) had around 347 items,” the statistics ministry said in the HCES 2022-23 press release. “In HCES: 2022-23, the questionnaire has been updated by inclusion of new items and merging some of the obsolete items together. The questionnaire of HCES: 2022-23 contains 405 items,” it said.
Economists have time and again called for the upgrade for the CPI series, as the current one doesn’t necessarily reflect the true price pressure points in the economy.
For instance, in the current series, the “foods and beverages” group in the CPI carries a weight of 46%. This is expected to fall down to 41%, if the government takes into account the results of the latest household consumption expenditure survey (HCES) only, FE had reported earlier citing an official.