R.B.M. Korale

Macroeconomic Policy Series

Price statistics are important because they are used in analyzing economic activities and in formulating economic policies. The Consumer Price Index (CPI) is the most widely used and best known measure of the changes in the cost of living and inflation. However, none of the currently compiled indices are reliable indicators of inflation in Sri Lanka.

The Colombo Consumers’ Price Index (CCPI) and the Greater Colombo Consumers’ Price Index (GCPI) are outdated and no longer representative as measures of inflation. The GDP deflator is not an independent indicator. There is, therefore, a need for a new index to serve as a general inflation indicator where the reference population is the entire population. The new CPI should be based on a specially designed Household Expenditure Survey (HES) that should be undertaken purely for designing weights for the CPI.

Only one state authority should be responsible for the compilation of the CPI and all aspects relating to data collection, compilation, processing of data to the release and publication of the CPI should be subject to confidentiality and statistical legislation. While the need for a new CPI has been accepted in principle, there has been no commitment on the part of users and the government to introduce one. However, the Department of Census and Statistics should set up a time table to revising the CPI.