New CPI basket won't include free food items

NEW DELHI: Free food items, such as wheat and rice made available through the public distribution system (PDS), to nearly 80 crore people will not be part of the new consumer price index (CPI) basket, as the 22-member technical advisory panel, tasked with updating the base year of price indices, has decided to stick to the global practice.

"Internationally, the norm is to not include free priced food, goods or service items. It was decided that we should not deviate from international norms. In other countries, free items constitute only 5-10% of the consumption basket, while in India free items are provided to a very large population," an official told TOI.

"In the existing CPI series, only subsidised food items are included in the basket. The completely free items are not included, and they won't be included under the new series as well. The suggestions that we got pointed to the distortionary impact on the inflation figures, as free items will likely show a low inflation," the official added.

The decision comes after prolonged discussions in the statistics ministry, regarding the inclusion of these free food items in the upcoming CPI series in recent years. Earlier, the ministry had released two discussion papers on the issue.

The issue of including free food items in the CPI series gained prominence after the Centre implemented Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in Jan 2023, which provides free food grains to nearly 75% of rural and 50% urban population.

Economist Arun Kumar said that an inflation figure, which does not include free PDS food items won't provide full picture. "A weighted average could have been arrived to include both market prices and PDS prices," he said.