Monday, July 26, 2010

Does NRB inflation data reflect real price hike

From rice to oil, vegetables, and fruits to cigarette in the market has become more expensive in last one year. The consumers are suffering from spiralling price hike since last couple of years. But the central bank has presented an 'unbelievable' data of price hike that has modertated to 9.7 per cent in the first eleven month of the fiscal year 2009-10.
"The year on year (y-o-y) inflation as measured by the consumer price index (CPI) moderated to 9.6 per cent in mid-June compared to 12.3 per cent increase in the same period a fiscal year ago," said the central bank.
However, the economists think that the consumer price index that measures the inflation itself needs revision.
Consumer price index reflects changes in the cost of acquiring a fixed basket of goods and services. The current CPI of the central bank has a basket of 301 goods and services. The prices of these are collected from the fixed market centres to calculate the CPI.
"The CPI must be revised," said Prof Dr Bishwambher Pyakurel. "Though the number of market centres and products have been increased lately, its not sufficient to reflect the real market price," he said. "Due to huge informal trade, the central bank data could also not reflect the real market and seems unbelievable."
The data is also under suspicion as it has no relation to the wholesale price index of India, from where Nepal imports in huge amount. "If there is an increase of 10 per cent in Indian wholesale price index, Nepal's CPI has to rise by 4.3 per cent and vise-versa," said Dr Pyakurel. "However, the price in the domestic market has seen increasing when the India wholesale Index was around zero also."
Another economist Dr Chiranjivi Nepal suspects the validity of the data. "The datas could be manipulated too," he said adding that the consumers are bearing the burnt of continued price hike and the central bank is producing the 'unbelieveble' data.
The central bank is the sole authority to produces economic indicators like inflation. "The central bank's CPI was developed in 1996," Dr Nepal said adding that the market has been expanded a lot since then. "The central bank must revise its system, otherwise it will lose its credibility."

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