New inflation index likely from Aug 14

A new system of inflation measurement, under which price changes of about 250 extra items would be covered, is likely to be rolled out by the government on August 14.

The present monthly inflation measurement system, based on the wholesale price index, reflects the price variations of 435 items.

The number of items would now go up to 685 and include a host of new products, including consumer goods like mobile phones and LCD televisions, sources said.

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

The Committee of Secretaries (CoS), headed by Cabinet Secretary K M Chandrasekhar, is likely to give a final shape to the new index next week. The base year of the new index would also be changed from 1993-94 to 2004-05.

"A note on the issue has been sent to CoS by the Department of Industrial Policy and Promotion (DIPP)...They may consider this next week," a senior official told PTI.
Prime Minister's Economic Advisory Council chairman C Rangarajan has also given his approval for the new wholesale price-based index, the official said. "The July inflation data is expected to be released on August 14 with the new base year," he added.

Asked if there would be any variations in the inflation when it switches to the new base year, the official said, "It would be insignificant and less than 1 per cent."

The new index would provide a more realistic picture of price rise and its impact on people, he added.