April 2, 2002	Tuesday	Muharram 18,1423

ISLAMABAD, April 1: The government on Monday unveiled a new Consumer Price Index (CPI), which not only has a changed base year (2000-01) but also enlarged the area of coverage in geographical terms and new items now in increasing use but not included in the index with 1990-91 as the base year.

Explaining changes in the new system of measuring the rate of inflation, Secretary, Statistics Division, Abu Shamim Arif, told newsmen the government had continued to revise the CPI ever since independence, keeping in view the changes in patterns of household expenditure as well as in incomes.

Underlining the importance of its revision from time to time, he said CPI was the most widely used index that was used as a measure of inflation and viewed as an indicator of the effectiveness of the government’s economic policy.

He was assisted by Director General, Federal Bureau of Statistics, Dr. Noor Mohammad Larik.

Earlier, the government had set up a group of experts both from the public and private sectors to review the methodology, weights, basket of goods and services and other issues related to CPI.

Initially, 1948-49 was adopted as the base year of CPI. Subsequently, it was changed to 1959-60, 1969-70, 1975-76, 1980- 81 and 1990-91. Thanks to the electronic computing equipment and employment of new concepts, the work for change of base year took only six months, although in previous decades, the same was changed after a time lag of four to five years.

In the CPI basket formulated on the basis of 1990-91, the number of items was 460. It has been reduced to 375 in the new CPI. In that process, 141 items were excluded and 56 new ones were added.

In previous CPI, Mr Arif stated, weights of seasonable items were excluded from the computation of CPI; in the 2000-01 base, however, these have been added.

As regards the area of coverage, he said the number of cities to be covered under CPI too, has increased. Henceforward, qualified prices collectors of FBS, supervised by senior officers, would gather prices from 71 markets of 35 cities. In the previous base, the number of cities so covered was 25.

The expansion of coverage means, Dr Larik said while describing the methodology and concepts used in computing CPI, increase in markets not only urban areas but also rural areas. In the new series, more emphasis has been given to the income groups instead of categories of employees. It was realized that indices developed for categories of employees did not differ significantly.

Weights on income group level will now cover all the categories of employees, i.e., industrial, commercial, government as well as self-employed and employer.

Various income groups, too, have been modified. Instead of five as in 1990-91 base with the lowest income level of up to Rs1,500 per month and the highest of Rs10,000 and above, the new base has four groups. The lowest income group now has income of up to Rs3,000. The highest income bracket is Rs12,000 and above.

The base 2000-01 follows the results of a Family Budget Survey conducted by FBS that covered the expenditure patterns of a sample of 48,806 households throughout Pakistan. For the purposes of new CPI, a combined index would be computed at Pakistan level by using weights of 52 cities and average prices of 35 cities.

This index, the group of experts recommended, would be used as a measure of inflation.

The group also debated the question of periodicity of the base of CPI. In view of the enormous cost, time and work involved in shifting base, it recommended that the base be shifted after every 10 years as in the current practice. This practice was also being followed by most of the developing countries.

Nevertheless, it stressed, the FBS should review the weights through case study after five years in order to determine whether any significant change had taken place in consumption patterns warranting the adopting of new base prior to the proposed time frame.