Central Bank Introduces New CPI Basket

Central Bank Introduces New CPI Basket
The Himalayan, 20-Oct-2010

The central bank has introduced a new Consumer Price Index (CPI), increasing the earlier basket of goods and services and market pointers to update the measurement system and make more realistic according to the international standards.

The new basket has been developed on the basis of Classification of Individual Consumption According to Purpose (COICOP). The United Nations has included this system in 1993 under System of National Accounts (SNA).

“The new series of Consumer Price Index (CPI) has been started from this fiscal year’s first month,” said the central bank here today.

The central bank has upgraded the CPI series to the new one according to its findings of Family Survey five years ago.

“Nepal Rastra Bank (NRB) has also shifted the base year from 1995-96 to 2005-06,” it said, adding that under the new series, the weight assigned to the food and beverage and services groups have also been changed.

According to the new CPI series, the weight assigned to the food and beverage group is 46.82 per cent in the new series compared to 53.20 per cent in the 1995-96 survey.

Likewise, the weight assigned to the non-food and services group has been changed to 53.18 per cent from 46.80 per cent.

Similarly, the central bank has increased the urban and rural market centres — from where they collect datas — by 12 to 33 from the old 21 urban market centres in the old series. “The old basket of 301 goods and services has also been increased in the new series to 410 goods and services,” it added.

Under the 401 goods and services, 223 are domestic, 133 imported and 54 goods and services are both domestic and imported.

“The change in the CPI will help make the price hike measurement more simple, authentic and scientic,” according to the central bank.

Had the central bank used the old series, inflation rate in the first month of the current fiscal year would have been at 10.4 per cent. “But inflation stands at 9.5 per cent due to new measurement system,” the central bank said, adding that despite a 12.5 per cent rise in the index of the food and beverage group, inflation moderated to a single digit at 9.5 per cent due to low increment in the index of the non-food and services group.

Meanwhile, the International Monetary Fund (IMF) has forecast that the Consumer Price inflation will come down to 6.8 per cent in 2011. “For the year 2010, CPI will stand at 10.5 per cent,” the IMF has predicted.