IIT-B Paper: Housing CPI Computation Review

Mumbai, Dec 21 (PTI) A technical paper by IIT-Bombay has suggested changes on the proposed revisions to capturing changes in the housing services component of consumer price inflation (CPI).

The paper by Prof Ashish Das and Praggya Das, who was formerly associated with the RBI's monetary policy department, welcomes a slew of aspects, including the need to shift the base year to 2024, but raises concerns on the proposals.

Among other aspects, it supports continuing with the current six-month moving panel method, calling the practice as a "robust method", and argues against making it into a practice where enumerators visit a household every month.

"Covering all dwellings each month is not a good idea," the technical paper, which came out earlier this month said.

Housing has an over ten percentage point weightage in the CPI basket.

Given that house rentals do not change every month, the proposal to collect rent data monthly from the entire sample of over 25,000 dwellings as against a panel survey covering just about 4,000 dwellings per month will lead to a sharp upsurge in the cost of price collection, putting an avoidable burden on the national exchequer, raise respondent fatigue and risks compromising data quality.

"If resources are actually available, it would have been desirable to increase the coverage of dwellings in the six monthly panels instead of visiting them every month," Das told PTI.

The Ministry of Statistics and Programme Implementation is backing the changes because it feels that the extant housing index compilation method is defective, the paper said, arguing that the current methodology lacks "scientific rigour" and it may not merit a shift to a completely new system.

"Perception on the extant method's drawbacks are not correct... distortions in the housing index are addressable," the paper said, adding that issues can be solved through better data utilisation and may not require methodological overhaul.

It also backed a few of the changes in the new proposals, including expanding house rent measurement to rural areas; excluding employer provided dwellings for measuring rent; and using Census 2011 frame.

Backing the suggestions made in the report, former director of Indian Statistical Institute Bimay Roy said the current chain-based index is equivalent to the fixed-base index, and it cannot be the source of the unexplainable periodic movements MOSPI seeks to correct.

"(The authors) compellingly argue that the proposed shift to monthly data collection from every dwelling would impose an avoidable burden on the exchequer and respondents alike, without a commensurate increase in informational value," Roy, a Padmashri recipient, said.