A welcome revision

NEW INDEX HAS MANY IMPROVEMENTS OVER PREVIOUS SERIES, 2011 CENSUS AS A BACKDROP DOESN'T HELP

- PC MOHANAN

EBASING MACROECONOMIC INDICATORS are routine exercises in all official statistical systems. The rebasing is needed to account for the changes in the underlying structure of an economy or consumption, production, etc.overtime.The dearth of such exercises in recent years in India was amajor criticism of national statistics. The continued use of outdated base years for key indicators is also an issue that the International Monetary Fund has repeatedly flagged during their annual consultations.

The government and the Reserve Bank of India use it widely as an indicator of retail inflation. It plays a critical role in inflation targeting and monitoring price stability, besides indexing dearness allowance of employees to neutralise price changes in their wages and salaries. The behaviour of the new index will be closely watched by all.

The just-released CPI with 2024 as the base year has many improvements over the current series which had a base year of 2012 and was used since 2013. For the previous index, the distribution of weights for different items of consumption was based on the household consumer expenditure survey of 2011-12. In case of the new index, the 2023-24 survey provided the weights and item basket. The government had junked the household expenditure survey of 2016-17 due to quality concerns.