ISLAMABAD, May 7: The delay in increasing the coverage of areas and revising of consumption pattern for the measurement of inflation for the last couple of years has benefited the government to conceal the actual inflationary pressure in the economy, Dawn has learnt.
For revising the base for measurement of inflation, the government was supposed to conduct family budget survey since July last, which had been delayed for one year for lack of availability of funds, which is just an excuse, as government has already started a number of other surveys.
This only means that government wanted to go with the old pattern, as it is based on the survey of only 30 per cent population living in the urban countryside as against more than 70 per cent rural consumers, who are altogether ignored while measuring the inflation rate.
Moreover, many items subject to survey are either outdated or its consumption has reduced drastically with the passage of time.
A senior official in the finance ministry told Dawn that the PC-1 was approved for the survey and it was expected to start the family budget survey from July 1, 2007 to identify representative items of consumption and its weightage in the monthly budget of consumers.
With the completion of the survey, the revised base for inflation would now be the year 2007-08, while it would come into operation from July 1, 2008. Currently, the base year of 2000-01 is under consideration.
As the base period is worked out on the consumption pattern of consumers, which changes with the passage of time, thus called for revision after every five years.
Under the existing system, the income group classification has also become redundant as it started with income up to Rs3,000 per month. With the appreciation of rupee and higher prices of consumer items during the last seven years, this income did not represent the lowest bracket.
Analysts have proposed to the government that there should be separate measurement of inflation for both urban and rural areas as the pattern of consumption is different in both areas.
There is no single true measure for calculating inflation, because the value of inflation will depend on the weight and magnitude of changes in their prices given to each goods in the index.
One could not rule out the possibility that some inflation figures deliberately exclude volatile goods from the basket to be able to gauge the '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 period 2000-01. The SPI is the small part of CPI and is issued on weekly basis.
The SPI comprises of retail prices of only 53 essential items and covers 17 cities. SPI 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 could not be compared with CPI and SPI.
"It can not be a real substitute of CPI as all of the items in both the indices are not common, therefore, the situation being observed in WPI would not be necessarily the same for CPI,", sources in the statistic division said.
Due to these changes, the movement recorded in the wholesale price of an item may not be reflected immediately in the retail price except the direct prices of petroleum. However, it can be an indicator to assess the fluctuation in CPI in future, the sources added.
The sources said most of the items covered in WPI are different from the items being covered in CPI. "If the same items in both the indices are used to construct these indices, the profiteering of 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 price to the consumers than the normal market price, in the list of items for calculating the national average prices, which is again violation of the methodology.
The FBS is also calculating the house index on the basis of increase in prices of inputs used in the construction of houses instead of the actual rent being collected from the market.