New Delhi: The proposed national Consumer Price Index (CPI) meant to measure retail inflation will be released by 20 February, the ministry of statistics and programme implementation has said.
This index will combine urban and rural CPIs, both under preparation and to be released simultaneously, the ministry has informed the standing committee on finance. The panel, headed by Bharatiya Janata Party leader Murli Manohar Joshi, submitted a report on this in Parliament on Monday.
Unlike many other countries, India does not have a unified CPI and uses the Wholesale Price Index (WPI) as a benchmark.
Fixing issues: Pronab Sen says the ministry is to decide between 2008-09 and 2009-10 for the base year for the new index. Ramesh Pathania/Mint
Confirming the deadline, chief statistician Pronab Sen said data collection is proceeding smoothly. “Once we get sufficient data, we will start the trial indices,” he said. “One real use (of national CPI) could be to model inflationary expectations.”
Abheek Barua, chief economist at HDFC Bank, said the unified CPI would usher in a fundamental shift in the way the Reserve Bank of India (RBI) targets inflation. At present, the central bank sets targets for WPI inflation and defines the course of its monetary policy.
“We are targeting the wrong price index. The national CPI will solve this fundamental problem,” he said.
On Tuesday, RBI hiked its key policy rates by 25 basis points, holding that the near double-digit WPI inflation is a worry for economic stability. One basis point is one-hundredth of a percentage point.
Sen said it was unlikely the new index would immediately replace WPI as the country’s main inflation measure.
“Trial indices of CPI (Urban) are expected to be compiled by February and trial indices of CPI (Rural) by September,” the statistics ministry had told the committee.
The National Sample Survey Organisation is gathering data for urban CPI from 120 cities and towns, and the department of posts from around 1,200 villages for rural CPI. The measures will be posted monthly.
The ministry has yet to get the approval of a technical advisory committee on the base year. “We are weighing between 2008-09 and 2009-10 for the base year,” Sen said.
On a proposal by the standing committee, the ministry has agreed to take up the responsibility of coordinating and releasing various price indices. The panel has asked it to pursue this with the National Statistical Commission, the nodal agency for clearing new statistical indices.
“We are at present going by the amount of work allocation assigned to us. The cabinet has to take a final call if that needs to be changed,” Sen said.
At present, WPI is released by the department of industrial policy and promotion, and targeted CPIs by the Labour Bureau.