Launch of new inflation index pushed back to Oct

The government has postponed the introduction of a new system of inflation measurement from August to October as it is tying up some "loose ends" to include about 250 extra items, like LCD TVs, in sync with modern times.

Earlier, Industry Secretary R P Singh had said the new index would come into force from August.

However, a senior Industry Ministry official said, "It will take some more time for us (Industry Ministry) to close some of the loose ends... By the end of September or early October, we should expect it to come in force."

The present monthly inflation measurement system, based on the wholesale price index, reflects the price variations of 435 items, with 1993-94 as the base year.

The new index would give a more realistic picture of the price rise and its impact on the people.

In the new wholesale price-based index for measuring inflation -- with 2004-05 as the base year -- the number of commodities will go up to about 680.

The official said the new index has been vetted by experts and the results were found to be "quite consistent".

The new index is likely to include a host of new products like LCD TV sets and other electronic products.

However, mobile phones and laptops may not find a place in the new index as their prices change very fast and models also get obsolete fast.

"We tried to accommodate digital products like mobile phones, laptops, but the problem that we are facing is that the technology is advancing day-by-day and the prices of these products vary on various factors, that too, again on a day-to -day basis," the official said.

As such, it would become difficult to take a particular item as a sample for the rest. "Also, the weightage accorded to different commodity groups will change according to their increased or decreased contribution to the system," he added.

Outdated items such as typewriters and video cassette recorders (VCRs) will also not find a place in the new inflation measurement mechanism.

The official also said the ministry is engaged in an effort to change the base year and the commodity basket in the index after every five years.

"If you see the other (western) economies, they keep on changing the commodity basket and base year after every five years to reflect the current scenario. We would also like to implement it in a similar manner," he added.