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March 31, 2016

How govt statisticians think India lives

In this Live Mint article, Karthik Sashidhar examines the underlying dynamics that inform the calculation of Inflation statistics in India. He argues that, "The weights attached to different product groups for the purpose of calculating the inflation rate present a fascinating picture of how government statisticians think India lives."


Key excerpts from the article are below


"Since 2012, the CSO has been releasing separate inflation indices for rural and urban areas (along with a consolidated number). This is necessitated by widely changing consumption patterns across these population groups. This also gives us an insight into what statisticians think is the difference between consumption patterns of rural and urban households.


As we can see in Figure 1, the major difference between the weights for rural and urban areas is in housing—which forms more than 20% of the urban consumer price index, but contributes absolutely nothing to the rural index.



While this might appear erroneous on first examination, the fact that most people in rural areas own their houses suggests that recurrent spending on housing is minimal."


"Even after adjustment (taking out expenses on housing), we see that people in rural areas spend more (as a proportion of total expenditure) on clothing, fuel and intoxicants compared to their urban counterparts.


The percentage spending on footwear and “personal care and effects” is roughly equal in rural and urban areas, while as expected, urban areas outstrip rural areas in spending on education, transport and household goods (it is likely that “fuel” as in “fuel and light” refers to cooking fuel rather than transportation fuel)."


Read the full article here


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