'Need to include e-tail prices to calculate CPI'

24 Oct '15

2 min read

An SBI Research report says that with e-retail market booming, there is a need to include prices offered by such players while calculating retail inflation as rising online shopping, normally driven by heavy discounts, may be understating the actual price index by as much as 0.25 per cent.

The report says e-retailing, which comprises online retail and online marketplaces, has become the fastest-growing segment in the larger market having grown at a CAGR of around 56 per cent during 2009-14. The e-retail market was around $6 billion in 2015.

"Our research indicates that only by considering the discount prices and that too for a select group of products, CPI inflation would be at least 25 bps lower that the actual CPI numbers," a news agency quoted SBI Research saying in its Ecowrap report.

According to the report, CPI inflation numbers may be understating due to a variety of inflation estimation biases, of which e-commerce is one of the reasons.

"A potential source of bias can arise when shifts to lower price discount outlets are inadequately reflected," the report said.

Books, apparel and accessories and electronics are the largest selling products on the online retailing platforms, constituting around 80 per cent of the volume.

"The increasing use of smartphones, tablets and broadband and 3G/4G has led to developing a strong consumer base which is likely to increase further. So, there is a need to include the prices charged by the e-retailers like Flipkart, Snapdeal, Amazon etc, while calculating the CPI index, and if done so there may be a downward bias," it said.

The findings are based on a price index developed by SBI Research which takes into account the prices being offered by online mega-stores and a re-estimated CPI inflation based on these probabilities. (SH)

Fibre2Fashion News Desk – India

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