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Sunday, 7 March 2010

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DCS denies allegations against CCPI :

No cooked statistics

The Department of Census and Statistics (DCS) denied a recent article published in an English Weekly that said food commodities in the basket of commodities which measured the Colombo Consumer Price Index (CCPI), the official consumer price index of the country became variable after President Mahinda Rajapaksa came to power in 2005.

The Director of Prices and Wages Division of the DCS A.D.S. Gunawardena said that this proclamation is factually incorrect.

The DCS completely denied the following comments stated in the article. For instance, if the price of a commodity in the food commodities basket, which is used to measure inflation, goes up by more than 5% in a month, it is taken out of the basket on the assumption that the consumer has gone for cheaper substitutes, thereby nullifying that price increase in the measurement of food inflation, with the vacuum in the food basket taken up by the substitute in what is known as the trimming process.

Gunawardana said that this is a pure imagination and has nothing to do with the calculation of inflation factor by the DCS. The CCPI measures over a period of time, the change in the cost of a fixed basket of goods and services commonly purchased by the majority of the urban households, with the quantity and quality of the basket held constant at the base period. Thus the index solely reflected price changes.

It is designed as a measurement of the impact of price changes on the purchase of consumer goods and services among the majority of households that a target urban population group consumes. It is estimated as a weighted average of the prices of the Market Basket of goods and services obtained from 12 different markets in the Colombo district, he said.

The Methodology of price index in Sri Lanka is compatible with the UN standards which is followed by other countries as well. The computation method used for the current CCPI is the same as that of the previous CCPI (1952 base) Laspeyres formula, with fixed weights proportional to the expenditure pattern of the base period.

The CCPI that was in force up to 2008 April had been computed using the pattern of consumption prevalent in 1949 using 1952 as the base year. The index was 56 years old by 2008 decades old and during the period of (1952 - 2008), significant changes in consumer habits and family income on the demand side, including in the range and availability of goods and services had taken place. Therefore the previous Price Index was no longer a good indicator of current changes in prices of consumer goods and services. Recognizing the need for a new and more reliable index of consumer prices, the DCS had on six previous occasions constructed revised series of index numbers in 1960, 1972, 1978, 1983, 1990 and 2002. However, these were not adopted and in spite of its limitations the CCPI with its outdated base of 1952 has continued to be the sole index.

In keeping with International practice a Consumers’ Price Index require regular revision at least every 5-10 years, to reflect changes in consumption patterns based on current consumer expenditure surveys.

This is how a new CCPI (base 2002) was implemented by the DCS and hence the implementation was not based on any political or other interests.

He said that there is no controversy in the mechanism of the calculation of the CCPI and DCS continuing it over long years independently without any political or other interference.

Gunawardena said that the article has been written, based on some pre conceived imaginary wishful thinking with no attempt being made to contact the DCS for clarification and education.

However the writer is correct in stating that both liquor and cigarettes have not been considered in keeping with the Government policy, he said.

 

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