Home ›› 26 Dec 2022 ›› Front
Amid much criticism by economists, the Bangladesh Bureau of Statistics (BBS) is considering using 2015-16 as the new base year for calculating inflation as the current one (2005-06) does not reflect the true picture and the changing consumer spending trends.
It will also include new products and services in the list prepared to calculate price inflation.
“We are thinking about changing the base year and also including some necessary grocery items in the consumer price index. We have already started the process,” a senior BBS official told The Business Post.
He said the BBS would complete the process within three months.
Inflation would be calculated using the new base year from March 2023 or the next fiscal year after getting policymakers’ approval, he also said.
Inflation, a hot topic in the country these days, stood at 8.85 per cent in November. It was 9.52 per cent in August, the highest in 11 years and three months.
Revealing the findings of one of its studies, the South Asian Network on Economic Modeling in March this year said the overall inflation rate was more than double the BBS figure.
It said the overall inflation rate in urban areas was 12.47 per cent, which was 12.10 per cent in rural areas. However, the BBS report on February 16 said the inflation rate was 5.86 per cent in the first month of this year.
Besides, the Sanem study found an 11.36 per cent year-on-year increase in food costs for marginalised households in urban areas in January this year, which was more than double the 4.85 per cent urban food inflation calculated by the BBS.
The study also said marginalised people in rural areas saw an 11.21 per cent hike in food prices, although the BBS estimated rural food inflation at 5.94 per cent.
The BBS official said they will use the data on inflation based on the Household Income and Expenditure Survey (HIES) 2016-17 as the HIES 2022 has not yet been completed.
Economists said such an initiative should be taken earlier as there is a difference between consumer prices and inflation.
They said real prices in the markets are higher than inflation while calculating inflation from older base years does not reflect changing consumer spending trends.
In the country, inflation is currently calculated based on 426 goods and services, including rice, lentil, flour, oil, soap, salt, sugar, gold, book, vegetables, notebook, pen and travel.
With the adoption of the new base year, 500-550 goods and services such as internet, transport, entertainment and some grocery items will be included in the list. BBS officials believe that this will give a more accurate picture of inflation.
“We are yet to take decision on the new products and services that will be included in the price index. We are examining which products and services are essential for consumers,” the BBS official said.
He said the new items would be included, considering consumers’ spending trends.
Distinguished Fellow of the Centre for Policy Dialogue Prof Mustafizur Rahman told The Business Post that the current method of calculating inflation does not provide the real picture of the prices of essentials and services.
“That is why it should be changed,” he said, adding that it is a good initiative to calculate inflation based on the current data.
The BBS will calculate price inflation according to the United Nations-approved Classification of Individual Consumption by Purpose (COICOP) 2018. In the method, inflation is calculated based on the trend of consumption as per the demand of a consumer.
In the process of calculating inflation using the new method, the consumption trends of people from the Household Income and Expenditure Survey 2016-17 has been taken into consideration. From there, a preliminary list of 500 products and services has been prepared, BBS officials said.
Executive Director at the South Asian Network on Economic Modeling Dr Selim Raihan told The Business Post that it is a good initiative taken by the BBS to calculate the real price index.
“Hopefully, changing the base year for calculating inflation will reflect the real price situation in the country. We can understand the inflation trend if the new base year is used,” he said.
He also expressed the hope that it would make products and services in the new calculation of inflation clear.
