Sri Lanka urban index finds prices rising 20-pct over year

Feb 21, 2013 (LBO) – An index that tracks key essential expenses of urban middle class households in Sri Lanka has found that prices rose more than 20 percent over the past year, about double that of a widely watched official index. The Capital Alliance index will maintain a fixed basket using a Laspeyres formula, named after its founder Etienne Laspeyres.

Inflation became a world-wide problem mainly after the Second World War due to unrestrained expansion of fiat money supply by state-run central banks that sought to generate prosperity through currency debasement.

In earlier ages, specie money and privately owned central banks restrained by specie (mainly gold) and public opinion given legal effect through parliaments had kept inflation down with periods of inflation followed by deflation.

Capital Alliance Research, tracked the prices of food and drink, fuel and light, communications, transportation across the past year found that prices rose 21.6 percent in the year to January 2012.

The official Colombo Consumer Prices found the cost of its basket rising 9.8 percent in the same period.

“The difference is that our index captures urban households island-wide,” Purasisi Jinadasa, head of research at Capita