New index reflects real inflation levels

The release of a new Colombo Consumer Price Index (CCPI) by the Department of Census and Statistics (DCS) is expected to more accurately and precisely reflect inflation levels in Sri Lanka.

Director of the DCS, D.C.A. Gunawardena, told The Sunday Times FT that no other country in the world used such an outdated index. He explained that the old index was from 1952 and despite approximately six revisions made to the index over the years, it still remained inadequate.

For example, electricity was weighted very low and kerosene was weighted very high, not a true reflection of current household consumption patterns. "Kerosene consumption is not that much today because of electricity and gas," he added.

"We have covered the urban sector of the Colombo districts, all income classes and all households with the new index," Gunawardena said. "This explains the prevailing consumption patterns of all households." There are 46 food items and 55 non food items in the new index. Some of the new items include water, electricity, telephone charges, mobile phone charges and rent. A complete list will be released by the DCS on December 15.

Critics have accused the government of adopting the new CCPI because inflation stands at around 17 percent as opposed to 19 percent with the old index. Responding to this, Gunawardena said the old index cannot be compared with the current one. "It is a tedious thing to compare the two because the old one is 55 years old," he said. "Our problem in this country is that we are always comparing new things with the old."

He explained that inflation may be less with the new CCPI depending on how things are moving. "As a department, we are always keen on releasing inflation using the 12 month moving average. If you use the point to point, the inflation figure is higher. It is better to have the inflation as a 12 month moving average." (NG)