India Proposes Major Overhaul of Housing Index for Consumer Price Index

The Ministry of Statistics and Programme Implementation is initiating a major revision of the methodology for compiling the Housing Index, a significant component of India's Consumer Price Index (CPI). Housing currently accounts for about 21.7% of expenditure in urban areas and 10.1% nationally in the current CPI series. The proposed changes aim to enhance the robustness and resilience of the CPI series.

Key proposed changes include: 1. **Monthly Rent Data Collection:** Rent data will be collected every month, a shift from the current bi-annual collection. 2. **Inclusion of Rural Housing:** The Housing Index will now cover both rural and urban sectors, unlike the current series which excludes rural areas due to data limitations. 3. **Exclusion of Non-Market Dwellings:** To ensure the index reflects true market conditions, rent data from concessional, employer-provided, or government accommodations will be excluded as they do not represent actual rental market transactions. 4. **Data Collection Sample:** Rent data will be gathered from 12 dwellings per urban market and 6 dwellings in selected villages, subject to availability.

Impact: This revision is expected to improve the accuracy and responsiveness of the CPI to changes in the housing market. It will provide a more reliable inflation measure, which can influence monetary policy decisions and economic forecasting. The inclusion of rural housing will offer a more comprehensive picture of living costs across the country. Rating: 7/10

Difficult Terms: * **Consumer Price Index (CPI):** A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. * **Housing Index:** A statistical measure used to track changes in the cost of housing, which typically includes rent and home maintenance costs. * **Imputed Rent:** An estimate of the rent that homeowners would have to pay if they were renting their own home. It's used in national accounts to value housing services for owner-occupied dwellings. * **Household Consumption Expenditure Survey:** A survey conducted periodically to gather information on the spending patterns of households across different income groups and regions.