New CPI to capture changing patterns

NEW DELHI: Any increase in mineral water and potato-chip prices, as well as changes in data usage charges will reflect in the retail inflation rate that the government announces every month using a revamped gauge. Hotel lodging charges and inverter prices are among the other items added to the new Consumer Price Index basket that aims to capture changing consumption patterns. CPI tracks inflation at the consumer level and has become the key measure of inflation used by the Reserve Bank of India for monetary policy action. It was revamped based on a household survey conducted in 2011-12 and unveiled last month. The previous one was based on a 2004-05 survey.

“The new index tracks price changes for the commonly consumed items, based on the consumer expenditure survey,” said a government official. “The new survey captures the rapid rise in Internet coverage in the urban areas since 2004-05, the rural counterpart is however yet to catch up.” More than threefourths of the households surveyed have reported consumption of the items included in the new basket, the official said. In the index, the Central Statistics Office added new items, dropped a few as well split some items and clubbed some others.

The number of items in the CPI has increased to 448 from 437 in rural areas and to 460 from 450 in urban areas.

The share of food in the CPI basket has fallen to 45.8% in the new series from 47.5% in the existing series. The phenomenal rise in Internet usage and mobile Internet in urban areas has led Internet expenses making to the CPI basket. Increase in price of packaged water during peak summer months will now get captured in the new CPI, with a growing percentage of urban population spending money on buying bottled water. The rise in income levels in the past 10 years has led to the consumption shift from food to nonfood category, especially towards clothing and footwear, which shows in the new basket.

The share of clothing and footwear in the CPI basket has seen a substantial increase to 6.5% from 4.7% - 7.36% for rural areas and 5.575 for cities. Instead of a broad category of ready-made garments, prices of each clothing item, such as sweater, coat, school uniforms, kurta pyjama, salwar, T-shirts, shorts, trousers, frocks and shirts will be covered separately. Other casual wear has been introduced as a separate item and includes maxis and nightdresses. Infant clothing is a separate item, too