The economists have long been raising questions about the process of collecting data and measuring the inflation rate.
The inflation rate is still being assessed on a 17-year-old base year.
Now, the Bangladesh Bureau of Statistics (BBS), the official agency to measure inflation rate, is thinking about changing both the process of measuring and the base year.
Inflation is a highly discussed topic now as it has gone up in the recent months.
The rate was 9.52 per cent in August, which is the highest in the last 11 years and three months. However, the inflation rate in November decreased to 8.85 per cent.
These assessments have been prepared by counting 2005-06 fiscal as the base year.
There is a difference between the calculated inflation rate and market price. The actual inflation rate is higher than the assessed rate. Besides, the inflation rate, which has been measured on an old base year, doesn't include the changed cost tendency of the consumers.
Asked about this, Selim Raihan, executive director of South Asian Network on Economic Modelling (SANEM), a private research agency, said, “It seems statements from different quarters have come to work in this regard. The initiative to create a new base year is commendable.”
He further said, “We more or less know about the prices of food products. Therefore, the tendency can be measured despite a little difference between the assessment of the BBS and the market price of food products. However, it is not clear as to non-food items and services like bus fare and house rent has been assessed on the basis of which area. I hope the new inflation measurement process will clear these confusions.”
Products are increasing by 25pc in the list
The inflation rate is measured on the basis of prices and costs of a total of 426 products and services, including rice, dal (lentils), coarse flour, flour, oil, soaps, salt, sugar, gold, books, notebooks, pens and transport costs. The weight of all the products and services in the list is taken as 100. Each product and service has specific weight. The highest 13 per cent of the total costs of the people is spent on rice.
Some 525 to 550 products and services will be included in the new base year. The BBS officials think this will make it possible to measure the inflation rate more precisely.
Mobile internet was not much available during the time of taking 2005-06 fiscal as the base year. However, the use of Facebook, messenger, WhatsApp and other social media has increased rapidly now. The use of mobile data has also increased simultaneously.
Therefore, the internet cost has become a part of the regular expenditure for the mobile phone users. The BBS officials now have decided to include mobile cost in the new list. The cost of transport and entertainment will also increase in the same way. On the other hand, the use of gold ornaments has decreased. Therefore, it may be excluded from the list.
Measurement under the new process
It has been learned that from now on the BBS will measure the inflation rate following the UN (United nations) approved process - ‘Classification of Individual Consumption According to Purpose-2018’. Under this process, the cost tendency is assessed on the basis of the demand of one individual and the inflation rate is measured based on the cost tendency of one individual.
The BBS officials say under the new process of measuring inflation rate, people’s cost tendency have been measured on the basis of the survey on family income and expenditures in the 2016-17 fiscal. The primary list of products and services has been prepared from that cost tendency.
The new list includes around 500 products and services. On the other hand, average price of these products and services throughout 2021-22 has been taken into consideration. That means price of products and services will remain updated. Since the 2022 household income and expenditure survey is yet to be completed, the BBS depends on the five-year survey.
The BBS’s National Accounting Wing has started working on creating a new base-year of inflation at the beginning of 2022-23 fiscal. Pressure increased to create a new base-year after inflation started rising on August this year. Economists criticised that assessment of inflation does not reflect actual scenario because of collecting data from old base year.
Wishing anonymity, several BBS officials said inflation assessment method, list of products and services, and weight have already been fixed. Once the policymakers approve, inflation measurement will begin with new base year from March next year or 2023-24 fiscal.
*This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Ashish Basu