New inflation index from August

The government will introduce a new system of inflation measurement from August that would cover price changes of about 250 extra items.

Industry Secretary R P Singh today said that the new index was ready and was likely to start from next month, after it had been approved by the committee of secretaries, headed by the cabinet secretary.

He said the new index had already been examined by experts who had found the results "quite consistent."

The monthly inflation measurement system in use currently, is based on the wholesale price index that reflects the price variations of 435 items.

"The number of commodities has gone up to something like 670... weights are accordingly arranged. This will become more reflective of inflation," Singh said.
 
However, the broadening of the WPI as per the new index with added items may reflect a higher annual inflation for June from 10.55 per cent, as currently computed.

The new index is likely to include a host of new products, including consumer goods such as mobile phones and LCD televisions, while out od use items such as typewriters and video cassette recorders would likely be dropped from the new inflation measurement mechanism.

The base year of the new index would also be changed from 1993-94 to 2004-05.

The new index is expected to give a more realistic picture of the price rise and its impact on consumers.