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IIT-Bombay researchers have reviewed proposed changes to the housing component of CPI, welcoming the base year update to 2024 but raising concerns over monthly data collection for all dwellings. The paper favors the existing six-month panel method, noting that visiting all 25,000 dwellings monthly would increase costs, burden respondents, and risk data quality. While supporting some proposals like rural inclusion and excluding employer-provided dwellings, the authors stress that flaws in the current index are addressable with better data use. Experts back the view, highlighting inefficiency of monthly collection.
A recent technical paper by IIT-Bombay has analyzed the proposed revisions to capturing changes in the housing services component of consumer price inflation (CPI). Authored by Prof Ashish Das and Praggya Das, previously associated with the RBI's monetary policy department, the paper welcomed certain aspects, such as updating the CPI base year to 2024, while expressing reservations about several proposals. Advertisement
The authors emphasized the importance of continuing the current six-month moving panel method for housing data collection, describing it as a robust method. They argued against visiting every household monthly, pointing out that covering all dwellings each month would be inefficient and costly. With housing carrying over a ten percent weight in the CPI basket, collecting rent data monthly from the full sample of over 25,000 dwellings compared with the existing panel survey covering around 4,000 dwellings would sharply increase the cost of price collection. This, they noted, could burden the national exchequer, increase respondent fatigue, and compromise data quality.
Das highlighted that if additional resources were available, expanding the coverage within the six-month panel would be preferable to monthly visits. The Ministry of Statistics and Programme Implementation (MOSPI) has supported the changes, citing deficiencies in the current housing index methodology. However, the paper contended that the perception of flaws in the existing method is overstated, suggesting that distortions in the housing index can be addressed through better data use rather than a complete methodological overhaul.
The paper also endorsed certain elements of the new proposals, including extending house rent measurements to rural areas, excluding employer-provided dwellings, and using the Census 2011 frame. Supporting these recommendations, former Indian Statistical Institute director Bimay Roy noted that the current chain-based index is effectively a fixed-base index and is unlikely to be responsible for the unexplained periodic fluctuations MOSPI seeks to correct. Roy further highlighted that shifting to monthly data collection for every dwelling would impose unnecessary burdens on both the exchequer and respondents without significant improvement in data value.
Source PTI
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