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Key Points

The government is updating how it calculates inflation to account for free food distribution programs. They've released a detailed paper explaining their proposed method after consulting with experts worldwide. Now they're asking for public feedback before finalizing the approach. This comes as India's inflation remains comfortably below the central bank's target level.

Key Points: Government Releases CPI Discussion Paper 2.0 on Free PDS Items

  • Government revising CPI base to reflect free food grain distribution scheme
  • New methodology developed with RBI, IMF and international experts
  • Public comments invited on PDS treatment in inflation measurement
  • CPI inflation edged up to 2.07% in August 2023
  • Free scheme covers 75% rural and 50% urban population
  • Modern technology being used for price collection improvements
2 min read

Centre releases discussion paper 2.0 on treatment of free PDS items in CPI compilation

Ministry of Statistics seeks public comments on methodology for including free food grain distribution in CPI inflation measurement by October 22 deadline.

"The issue has been deliberated in detail with the National and International experts, Reserve Bank of India, International Monetary Fund and other UN institutions - Ministry of Statistics"

New Delhi, Oct 4

The government on Saturday said it is conducting the base revision of the Consumer Price Index (CPI), as it released discussion paper 2.0 on the treatment of free PDS items in the CPI compilation.

The process includes enhancing coverage of price collection, refining existing methodologies, exploring new data sources and effective use of modern technology in the price collection and index compilation.

In view of the launch of free food grain distribution scheme by the government from January 1 2023 covering 75 per cent rural and 50 per cent urban population, the issue of appropriate and realistic reflection of the same in CPI and inflation measurement has become relevant and desirable, according to the Ministry of Statistics and Programme implementation (MoSPI).

“The issue has been deliberated in detail with the National and International experts, Reserve Bank of India, International Monetary Fund and other UN institutions and Government organisations,” the ministry informed.

The proposed methodology in the discussion paper 2.0 is designed by MoSPI after incorporating suggestions and feedback received during above mentioned interactions.

The ministry is inviting views and comments from experts, academicians, government bodies, state governments, financial institutions and other stakeholders on the Discussion paper 2.0 on treatment of free PDS items in the CPI compilation framework. Comments and suggestions may be sent by October 22.

India’s CPI inflation edges up to 2.07 pc in Aug, food inflation stays in negative zone

Meanwhile, India’s inflation rate based on the Consumer Price Index (CPI) edged up to 2.07 per cent in August, although prices food continued to decline during the month, easing the burden on the common man.

The headline inflation in August was marginally higher than the 1.61 per cent in July this year, which was the lowest level of year-on-year retail inflation since June, 2017. The inflation rate is well within the RBI’s target rate of 4 per cent, which allows the central bank to continue with the soft money policy to spur growth.

- IANS

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Reader Comments

R
Rohit P
As someone from a rural background, I can say the free food grain distribution has been a lifesaver for many families. But I hope this statistical adjustment doesn't become a tool to manipulate inflation numbers. The methodology should be transparent and consistent.
A
Arjun K
The timing is interesting - just when food inflation is negative and overall CPI is low. While the initiative seems good, I wonder if this will be used to show lower inflation figures artificially. The government should ensure the methodology is scientifically sound and not politically motivated.
S
Sarah B
This is actually a complex statistical challenge. How do you value something that's free? Should it be at market price or zero? The consultation with IMF and RBI experts is reassuring. Hope they get this right for accurate economic policymaking.
M
Meera T
My mother in our village says the free ration has helped her manage household expenses better. But in cities, we still feel the pinch of high prices for vegetables, milk, and other essentials. CPI should reflect both realities accurately.
V
Vikram M
Good to see international best practices being considered. However, I hope the final methodology doesn't underestimate the actual inflation burden on middle-class families who don't benefit from PDS but face rising education, healthcare, and housing costs. 🏠

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