Sri Lanka inflation index controversy takes new turn

Dec 12, 2007 (LBO) – A controversial new inflation index that claims to show lower inflation in Sri Lanka has completely dropped alcohol and tobacco from its market basket, an official statement has revealed. An official statement from the Central Bank's statistics department said the existing Colombo Consumer Price Index (CCPI) does not accurately represent modern consumption behaviour since it was based on consumption habits of working class families in 1951.

"The weight structure of the CCPI was not revised to capture the changing consumer habits," the Central Bank said, though the Census and Statistics Department said it had been revised several times.

Right and Wrong

The release of the new CCPI(N) index comes while the existing index for consumer prices in Colombo showed 19.6 percent inflation. The new index showed inflation at 19.3 percent in November and sharply lower inflation at other times.

But an island-wide index constructed less than a decade ago showed even higher inflation of 22.1 percent in September making nonsense of official claims that the inflation showed by the existing Colombo Consum