govt-likely-to-use-2022-23-data-for-cpi-revision

The government has completed the Household Consumption Expenditure Survey (HCES) for 2023-24, and preliminary findings indicate that the results are largely consistent with those from the 2022-23 survey, a senior official said on Monday.

 Consequently, the 2022-23 survey results are expected to be used for updating the Consumer Price Index (CPI) series to avoid further delays, the official added.

The 2023-24 HCES was conducted to test the robustness of the methodology used in the 2022-23 survey and to ensure that the previous results were not skewed by pent-up demand. The 2022-23 survey revealed that monthly per capita consumption had more than doubled over the past 11 years, increasing by approximately 1.5 times from 2011-12.

 During this period, the urban-rural consumption gap narrowed by 13 percentage points, and the share of food in the consumption basket decreased from 53% to 46%. Notably, the share of cereals in rural India's consumption basket fell sharply from 10.7% to 4.9%.

"The 2022-23 year saw economic recovery from the Covid-19 pandemic, which might have led to atypical spending patterns. Hence, we conducted the 2023-24 survey to ensure these anomalies did not affect the new CPI series," the official explained.

Despite some marginal differences between the two surveys, the committee is likely to adopt the 2022-23 data for the CPI revision. A 22-member committee has been established by the statistics ministry to deliberate on updating the CPI base year.

Earlier reports suggested that the government might reduce the weight of the "food and beverages" group by just over 5 percentage points in the new CPI series, from the current weight of 45.86%. Similarly, the weight of the Consumer Food Price Index (CFPI), currently at 39.06%, is expected to be reduced.

Sources indicate that the CPI base year will likely be updated from 2012 to 2024, with the changes set to take effect in 2026. The new CPI basket is anticipated to include 320-330 items, up from the current 299.

Economists have long advocated for updating the base year of key macroeconomic indicators, such as the CPI, to better reflect current economic conditions.

The Economic Survey 2023-24 highlighted the importance of revising the base year for critical data series like GDP, CPI, and the Index of Industrial Production (IIP) to more accurately represent economic activity.