Free food items like wheat and rice, distributed to nearly 80 crore people through India's public distribution system, will not feature in the new consumer price index basket. A 22-member technical advisory panel made this decision while updating the base year of price indices. The panel chose to adhere to global practices.
Following International Standards
An official explained the reasoning behind this move. "Internationally, the norm excludes free priced food, goods, or services from such indices," the official stated. "We decided not to deviate from these established international norms."
The official highlighted a key difference between India and other countries. "In many nations, free items constitute only 5-10% of the consumption basket. However, India provides free items to a very large segment of its population."
Maintaining Consistency with Existing Series
The current CPI series already excludes completely free items, including only subsidised food items in its basket. This approach will continue under the new series. "Suggestions we received pointed to potential distortionary effects on inflation figures," the official added. "Including free items would likely show artificially low inflation rates."
Prolonged Discussions Preceded Decision
This decision followed extensive discussions within the statistics ministry about including free food items in the upcoming CPI series. The ministry had previously released two discussion papers examining this issue in detail.
The question of including free food items gained significant attention after the central government implemented the Pradhan Mantri Garib Kalyan Anna Yojana in January 2023. This scheme provides free food grains to approximately 75% of rural populations and 50% of urban populations across India.
Economist Raises Concerns
Economist Arun Kumar expressed concerns about excluding free PDS food items from inflation calculations. "An inflation figure that omits free PDS food items won't provide a complete picture of price movements affecting most Indians," Kumar argued.
He suggested an alternative approach. "Authorities could have developed a weighted average that incorporates both market prices and PDS prices. This would offer a more comprehensive view of how prices impact different segments of the population."
The technical panel's decision reflects a commitment to international statistical standards while acknowledging India's unique welfare distribution landscape. This approach aims to maintain comparability with global inflation measurements while recognizing the significant role free food distribution plays in India's social safety net.
