Ministry of Statistics and Programme Implementation (MoSPI) organized the Brainstorming Session on The Treatment of PDS Items and other necessities in Consumer Price Index Compilation on 20th November, 2024 in Delhi. The Interaction was attended by around 100 participants including eminent economists from various Organizations & Financial Institutions such as Banks, Universities, NIPFP, NCAER etc. and various key users of CPI from both Central and State governments.

The session was attended by distinguished dignitaries including Prof. Ramesh Chand, Member, Niti Aayog, Dr. V Anantha Nageswaran, Chief Economic Advisor, and Dr. Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation. Other participants comprised eminent statisticians, economists, and professors by Dr. Surjit S. Bhalla, Prof. Himanshu, Ms. Mythili Bhusnurmath, Sh. Ashish Kumar, Sh. Asit Kumar Sadhu, among others.

While setting the context to the event, Dr. Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation emphasized the critical importance measuring the impact of the welfare measures, particularly in light of the Government's extensive welfare initiatives. He pointed out the need of robust methodologies in CPI and other indices to effectively capture the benefits of the social transfer programs.

This was followed by two presentations by MoSPI officials: one on the methodology for capturing PDS items and other essentials in the Household Consumption Expenditure Survey (HCES), and the other on the treatment of free PDS items in CPI compilation. The first presentation focused on the methods adopted for capturing PDS items and other necessities in the Household Consumption Expenditure Survey (HCES). The second presentation commenced by outlining the core objective of the Consumer Price Index (CPI), which is to quantify changes in consumer spending patterns. Subsequently, the discussion delved into the challenges of incorporating free Public Distribution System (PDS) items into CPI calculations. The presentation also mentioned international practices and the mathematical complexities associated with integrating these free items into the CPI framework.

Dr. V Anantha Nageswaran, Chief Economic Advisor to the Government of India in his address mentioned that the value of the items distributed under PDS is a significant proportion of the household consumption. The context of the international practices should be examined with a wider body of experts to come to a holistic decision in such an important matter.

Prof. Ramesh Chand, Member, NITI Aayog in his address emphasized that the impact of items distributed for free under PDS will have on the prices of that item in the open market needs to be closely examined. Hence, whether free items should be excluded or not from the purview of CPI, will merit further consideration. Prof. Chand lauded MoSPI for organizing such a discussion and it is through such brainstorming exercises that solutions to such complex issues can be thought through.

An open house discussion ensued afterwards which witnessed active participation from the audience. Based on the discussion, the key takeaways are as follows:

• MoSPI should continue its consultations as a part of the rebasing exercise to produce a more robust methodology for calculating CPI, which will be future ready to be able to incorporate policy changes which may impact prices.
• A zero price is also a price and this fact should not be ignored.
• A similar session be held with a broader group of experts, from the relevant disciplines, on the subject including international agencies to further examine the issue of inclusion of free PDS items in CPI.
• To increase statistical literacy, MoSPI may focus on providing more information on compilation procedures of its product by way of animations and short snippets. Awareness needs to be created so that people are able to understand the data that is being regularly disseminated by MoSPI.

Treatment of free PDS items in CPI: consultations urged to refine inclusion methodology and enhance statistical literacy MoSPI held a brainstorming session on the treatment of free PDS items in CPI and methods for capturing PDS and essentials in HCES. Presentations addressed CPI objectives, integration challenges and international practices. Key recommendations: continue consultations during CPI rebasing to develop robust, policy responsive methodology; assess market price effects of free PDS distributions and treat zero prices appropriately; engage a broader multidisciplinary and international expert group; and enhance statistical literacy through accessible dissemination of compilation procedures.