Asia-Pacific Economic Statistics Week

Session IV

Improving the quality of price

statistics:

Monitoring consumer price trend

using daily price data of online

grocery stores in India

Anirban Sanyal

Reserve Bank of India

Asia-Pacific Economic Statistics Week

Content

I. Research question and scope of study

II. Literature review

III. Online grocery and e-retail

IV. Data used

V. Methodology

VI. Findings

VII. Remaining issues/further research

Asia-Pacific Economic Statistics Week

I. Research question & scope of study

• Food items drives consumer inflation in recent times

• Wt of food item in overall CPI: around 46%

Asia-Pacific Economic Statistics Week

I. Research question & scope of study Price stability - one of the major mandate of central banks across

countries

Major impediments

• Official estimates of CPI and WPI comes with a lag

• Drivers of inflation can be different

• High frequency data of these inflation drivers are rarely found

Objective of the paper

• To assess the viability of using daily price data from online grocery

stores to track retail inflation

• To check the degree of coherence at different item basket level

• Is there any possibility of divergence between the official estimates

and such price data

Asia-Pacific Economic Statistics Week

I. Research question & scope of study

Contribution of the paper

Identifying alternate data source

Policy implications as real time tracking of inflation

Identify adverse price shocks on drivers of inflation

First of its kind in Indian context

• Online grocery is only a step towards using high frequency data

• Other high frequency data can also be tried

• Spatial coverage and item basket coverage – major challenge

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II. Literature review Authors Contribution

Cavallo (2010) Scraped Data and Prices in Macroeconomics.

(Ph.D Dissertation)

Cavallo and Ribogon

(2010)

Initiated project titled “MIT Billion Prices Project”

(BPP)

Cavallo (2013) "Online vs Official Price Indexes: Measuring

Argentina′s Inflation"

Cavallo and Ribogon

(2016)

The Billion Prices Project: Using Online Prices for

Measurement and Research

Cavallo (2016) Are Online and Offline Prices Similar? Evidence

from Large Multi-Channel Retailers

MIT Billion Prices Project

BPP covered over five million commodities sold across 300 online retail chains

in more than 70 different countries

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III. Online grocery and its future

Survey report of Nielson (April, 2015)

• More than 80% of 30000 respondents across countries find it convenient

to order from online grocery stores.

• Asia-Pacific Region has been a leading region for adopting such online

initiatives in grocery market

Technology Preference

Access to Mobile internet

Application based hassle free ordering

Online grocery

• Major thrust in food and

beverage

Asia-Pacific Economic Statistics Week

III. Online grocery store in India

2011

• BigBasket

• ZopNow

2012

• LocalBana

ya.com

2013 2014

• Grofers

• Peppertap • Jugnoo

History of online grocery stores in India

Asia-Pacific Economic Statistics Week

III. Online grocery store: Prospect in

India

The food and grocery

industry in India is now

worth $383 billion and is

expected to touch $1

trillion by 2020 - Technopack

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IV. Data used • daily price data from one of the major online grocery of India,

Bigbasket.com

• daily price of around 2200 commodities have been monitored over 5

months horizon (Apr-Aug 2015)

• The business operation of the aforesaid online grocery store has been

found to be restricted only to 5 major cities namely Hyderabad,

Bengaluru, Chennai, Mumbai and Pune.

Asia-Pacific Economic Statistics Week

IV. Data used

Item Code Unique identifier of each commodity which is maintained by

online grocery

Item

Description Description of the item

City City name

Sale Price Sale price quotation of commodities

MRP Maximum retail price

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V. Methodology

• The items which does not have any reported price, has been excluded

from the analysis.

• MRP has been used as representative price quotation across commodities

• as the information on MRP is not available for Bengaluru, the sale price has

been used as proxy for MRP for Bengaluru only

Data cleansing and transformation

Mapping online grocery commodities to CPI item basket

876

702765

525614

Bangalore Hyderabad Mumbai Pune Chennai

No. o

f uni

que

com

mod

ities

offe

red

Asia-Pacific Economic Statistics Week

V. Methodology

CPI Items No. of items mapped

Palak and other leafy vegetables 260

other fresh fruits 257

other vegetables 254

gourd, pumpkin 161

mango 138

beans, barbati 94

apple 92

banana (no.) 72

onion 72

processed food 70

brinjal 64

tomato 55

Asia-Pacific Economic Statistics Week

V. Methodology

Construction of Index

City level index 𝐶𝑃𝐼𝑖𝑡𝑐𝑖𝑡𝑦

=𝑃𝑖𝑗𝑡

𝑐𝑖𝑡𝑦

𝑃𝑖𝑗0𝑐𝑖𝑡𝑦

× 100

𝐶𝑃𝐼𝑖𝑡𝑎𝑔𝑔𝑟

=1

𝑤𝑖𝑐𝐶

𝑐=1

× 𝑤𝑖𝑐× 𝐶𝑃𝐼𝑖𝑡

𝑐

𝐶

𝑐=1

Aggregate Index

Comparative analysis and deep-dive

• CPI item level indices are rebased at Apr-15=100 for comparative purpose

• The comparative analysis has been carried out using visual inspection

Asia-Pacific Economic Statistics Week

VI. Findings

• Co-movement in potato price but sharp increase during Jun-15 which is

not that high in official estimates

• Onion price which increased significantly during Jul-Aug 2015, is properly

captured by daily data

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VI. Findings: Co-movement in price

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VI. Findings: Divergence

94

96

98

100

102

104

106

108

110

112

114

80

100

120

140

160

180

200

220

Apr-15 May-15 Jun-15 Jul-15 Aug-15

Pappaya

CPI (Derived) Composite

• Divergence between official

estimates and daily data

observed in some fruits and

vegetables

Asia-Pacific Economic Statistics Week

VI. Findings: Deep dive

Spatial divergence

Asia-Pacific Economic Statistics Week

VI. Findings: Deep dive

Commodity basket: Mapping issues

CPI BigBasket

Ap

ple

Fresho Apple - Fuji Fresho Organically Grown - Apple

Fresho Apple - Royal Gala Fresho Apple - Queen

Fresho Apple - Washington Fresho Apple - Shimla

Fresho Apple - Green Fresho Apple - Golden Delicious

Fresho Apple - Kinnaur Fresho Apple - Granny Smith

Fresho Apple Fuji Premium Fresho Apple - Indian

Asia-Pacific Economic Statistics Week

VII. Remaining issues/further research

• The daily price data is able to track the price momentum across

commodities which matches with the official data

• Divergence in price momentum is also observed in certain commodities.

• The divergence of price momentum can be attributed to regional

coverage and items covered under these online services.

• Such divergence between online data and official estimates has also

been observed by Cavallo (2012)

• As these online groceries are spread out only in metro cities, the price

quoted in these online groceries are often representative of premium

quality of items.

Further scope includes extending the timeline of analysis along with

increasing coverage of the item basket by incorporating larger information set from other online groceries.

Asia-Pacific Economic Statistics Week

Thank You