NEW DELHI: The government has completed the Household Consumption Expenditure Survey (HCES) exercise for 2023-24, and preliminary analysis shows that its results are largely similar to the one of 2022-23, a senior official told FE. So, the 2022-23 survey results are most likely to be used for formulating the new Consumer Price Index (CPI) series to avoid any further delay in its formulation, the official added.
The HCES 2023-24 was conducted for two reasons: checking robustness of the methodology adopted to conduct the 2022-23 survey; and ensuring that the previous survey results were not influenced by pent-up demand.
One of the findings of HCES 2022-23 was that monthly per capita consumption “more than doubled” in the 11 years to 2022-23– it grew by roughly 1.5 times from 2011-12. During the period, the urban-rural gap continued to narrow –down 13 percentage points–, and food’s share in the consumption basket continued to drop (from 53% to 46%). A sharp fall in cereals’ share in the consumption basket – from 10.7% to 4.9% in rural India – was also found.
“The year 2022-23 saw the economy recovering from Covid-19 pandemic…which could have led to higher spending by households on some items, that they usually don’t. Hence, the 2023-24 survey was conducted, as we wanted to ensure that we don’t factor in those results to build the new CPI series,” the official explained.
“However, there’s a marginal difference that we’re seeing in both the survey results. The committee is discussing what survey results to adopt, but most likely we’ll go with the 2022-23 data (for CPI revision),” the official added. The statistics ministry has formed a 22-member committee to deliberate on updating the base year of the new CPI series.
FE had reported earlier the government may reduce the weight of the “food and beverages” group by a little over 5 percentage points (pps) in the new CPI series. In the extant one, the group carries a weight of 45.86%. The weight of Consumer Food Price Index (CFPI), presently 39.06%, is also likely to reduce by a similar degree.
Official sources suggest the ministry will update the CPI base year to 2024 from 2012 at present, and will bring in effect the change from 2026. The new CPI basket is expected to contain 320-330 items, compared with 299 in the current one.
Economists have repeatedly pointed to the dire need of updating the base year of key macro indicators, specifically the CPI, as the current figures based on the present base years don’t necessarily represent the true state of economic activity. The Economic Survey 2023-24 had stated that it is “important that the base year of critical data series like the GDP, different price indices (WPI and CPI) and the IIP are updated to the most recent feasible year at the earliest”.
Source: The Financial Express
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