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As the headline inflation clocked in at a surprisingly low 6.9 percent for September 2024, skeptics were quick to raise doubts about the authenticity of numbers released by PBS. Some accuse PBS of fudging it, others stop at criticizing the methodology. Some do it depending on their political affiliations, while others have become habitual, questioning anything and everything coming from PBS.

Firstly, this is not a piece aimed at defending PBS. It has its shortcomings, and this space has multiple times called out for methodology limitations and omissions in a variety of datasets. (See: CPI - Correction time for PBS again, Gas tariffs: Did the PBS get it wrong again?) But what the PBS must not be wrongly called out for is deliberate fudging and underreporting of inflation numbers, especially. There are instances in the past where the PBS, owing to methodology shortcomings, has actually understated and overstated LSM and inflation readings, respectively.

The most frequent criticism is on the PBS’ treatment of electricity prices. The naysayers argue that electricity price change in the CPI reflects only 4 percent of total domestic electricity consumers, as the methodology accounts for only consumers in the lifeline category of up to 50 monthly units. The reality could not be further from the truth.

This is how it is. The CPI methodology accounts for entire domestic electricity consumption across all consumer categories, divided into five consumption quintiles. Consumer weightage is assigned according to the category-wise data provided by the relevant authorities. Had the PBS only been accounting for lifeline consumers in the CPI readings, there would never have been a change in readings over the years – as lifeline tariffs have barely moved.

The PBS has also corrected the course on the treatment of monthly and periodic adjustments, and various surcharges outside of base tariff. Up until September 2019, when the revised methodology was announced, electricity prices captured for CPI did not reflect changes in monthly FCA and hence were not reflective of the true picture. It has been five years, but the critics do not seem to have received the memo. The only glitch in the methodology was that the PBS did not take into account the previous slab benefit. After the base tariff revision in July 2023, that too, has been taken care of.

Another misplaced criticism of the inflation data is that it does not account for city weights. The revised methodology (now in place for five years) has taken care of the anomaly and all prices are based on city weights based on population and reflect a fair representation of nationwide price changes.

There are also those who do not find the goods’ retail prices compatible with their nearest kiryana stores or supermarkets. That is because it is practically impossible for any agency in the world to collect retail prices from every nook and corner of all cities. The PBS collects data from 68 markets in 35 cities – which is comparable to international best practices.

This is not to say there are no grey areas. For instance, gas price computation does not account for slab benefit and has mistreated fixed charges. There are areas of concern in GDP and LSM tabulation – but none point at deliberate attempts to buttress the numbers.

Comments

200 characters
KU Oct 03, 2024 11:01am
Our country is best place to live, if you are in govt n have the right but corrupt company. Nothing short of a Greek tragedy we live in, yet ruling horde plunder-on leaving behind nation in misery.
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MBB Oct 03, 2024 12:11pm
What about increase in taxes? is that factored as Purchasing Power has depleted
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hooman Oct 03, 2024 08:38pm
It's good that BR cleared up the misconceptions.
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MOS Oct 04, 2024 02:31pm
These numbers are not the true representation of the Inflation a common is facing with a limited income.
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zh Oct 04, 2024 11:40pm
If people have no money and cannot purchase, the prices will automatically come down. Therefore the lower inflation may not be a good news.
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