Sri Lanka under pressure to de-politicize price index

Feb 09, 2008 (LBO) – Pressure is mounting to de-politicize Sri Lanka's new price index, which the authorities are already using as a guide for monetary policy and are pushing trade unions to accept for indexing wages. The new Colombo Consumer Price Index or CCPI (N) has come under fire for excluding alcohol in an attempt to understate inflation and also for not representing the spending patterns of working class people.

Sri Lanka's Department of Census and Statistics claims that the new index is based on the international 'classification of individual consumption by purpose' or COICOP.

But one of the eleven expenditure groups in the classification which contains alcohol and tobacco has been completely dropped from the basket. In Sri Lanka alcohol and tobacco are taxed heavily and have tended to increase in price.

Technical Practice

At a recent seminar about the index, the highly respected former head of statistics of Sri Lanka's central bank, Anila Dias Bandaranaike, suggested that authorities include dropped items in the index.

"It is very timely that the Statistics Department has revised the index to reflect the data from the latest consumer surveys," she said.

"But if we are fo