Mumbai: Inflation based on the Consumer Price Index (CPI) would be about 25 basis points (bps) lower if the index were to be reconstructed by taking into account the lower prices being offered by online retailers, according to the research department of State Bank of India (SBI).

“We have constructed a price index that takes into account the prices being offered by online mega stores and have re-estimated the CPI inflation. Our results indicate that only by considering the discount prices and that too for a select group of products, the CPI inflation would be at least 25 bps lower that the actual CPI numbers," said Soumya Kanti Ghosh, chief economist at SBI in a report released on Friday.

One basis point is one-hundredth of a percentage point.

Retail inflation quickened to 4.4% in September from 3.74% the previous month. According to the minutes of the technical advisory committee which met ahead of the RBI’s September monetary policy review, some members felt that inflation, if adjusted for discounted prices being offered by online retailers, would be lower.

“.. with vendors engaged in e-commerce offering low prices, retail inflation may be lower than what the headline number suggests," the minutes said.

SBI’s reconstructed index accounts for items such as electronics, clothing, footwear and books. It built in the lower prices being offered by online retailers during the recent festive season. As such the impact of online sales on inflation would be more pronounced during these months. However, according to Ghosh, prices offered by online retailers have been at a discount compared with offline retail prices.

“The festive month accounts for 30-40% of a year’s sale for e-commerce companies. Apart from the evergreen product categories like electronics (including mobiles) and apparel, there is an emergence of new categories like home and kitchen and furniture, which have seen huge traction in the current year," said Ghosh.

E-retailing, which comprises of online retail and online marketplaces, has become the fastest-growing segment in the larger market having grown at a CAGR (compounded annual growth rate) of around 56% over 2009-2014, said the report, adding that the size of the e-retail market is pegged at $6 billion in 2015.

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