December 08, 2008	Monday	Zilhaj 9, 1429

ISLAMABAD, Dec 7: A delay in including more areas and in revising consumption patterns for measurement of inflation has helped the government to conceal actual inflationary pressures in the economy, Dawn has learnt.

Before the start of the year, the government had completed the family budget survey, launched in July 2007 for the purpose of revising the base for measurement of inflation. The exercise was delayed for years on the pretext of non-availability of funds.

A senior official in the finance ministry told Dawn that the Federal Bureau of Statistics (FBS) had compiled the survey results, suggesting drastic changes in the food consumption patterns and need for inclusion of more areas in the consumer price index (CPI) to make it more representative.

On completion of the survey, the revised base year was to be 2007-08. The changes were supposed to be made with effect from July 1, 2008. Currently the base year of 2000-01 is under consideration.

Since the base period is worked out on consumption patterns, which change with the passage of time, it needs to be revised every five years.

The official said the excuse of non-availability of funds for conducting survey to revise the base year of CPI was unjust because the government had started a number of other surveys and projects.

Analysts said the government wanted to continue with the old pattern because it was based on a survey of urban areas only, ignoring rural consumers who comprised 70 per cent of the total population.

Moreover, many items covered by the survey are either outdated or their consumption has declined drastically with the passage of time.

The present average rate of inflation is around 25 per cent and if the base year is revised it will go up to over 30 per cent.

An official source said under the existing system the income group classification had also become redundant as it started with income up to Rs3,000 per month. With depreciation of the rupee and increase in prices of consumer items during the past seven years, the income no more represents the lowest bracket.

The government has already raised the minimum wage to Rs6,000.

The analysts proposed separate measurement of inflation for urban and rural areas because of their different consumption patterns.

There is no single real measure for calculating inflation because the value of inflation will depend on weight and magnitude of changes in prices given to each goods in the index.

An official in the FBS did not rule out the possibility that some inflation figures deliberately exclude volatile goods from the basket to gauge ‘core’ rate of inflation.

On the other hand, the FBS is computing two other types of price indices -- Wholesale Price Index (WPI) and Sensitive Price Indicator (SPI) -- with base year of 2000-01. The SPI is a small portion of CPI and is issued weekly.

The SPI comprises retail prices of only 53 essential items and covers 17 cities. It is used to view the price fluctuations at short intervals of time, while WPI measures the wholesale prices of various items collected from 18 wholesale markets of the country. However, the WPI cannot be compared with CPI and SPI.

“It cannot be a real substitute for the CPI because all items in both indices are not common. The situation, therefore, being observed in the WPI will not be necessarily the same for CPI,” sources in the statistics division said.

Due to these changes, the movement recorded in the wholesale price of an item might not be reflected immediately in the retail price, except direct prices of petroleum. However, it could be an indicator to assess fluctuation in the CPI in future, the source added.

Most of items covered in the WPI are different from the items being included in the CPI. “If the same items in both the indices are used to prepare these indices, the profiteering by wholesalers and retailers can be measured,” they said.

Under the current system, the government has also included the Utility Stores, which sell goods at cheaper prices than market rates, in the list of items for calculating the national average prices, which is again a violation of methodology.

The FBS is also calculating the house index on the basis of increase in prices of inputs used in construction of houses instead of actual rent being collected from the market.