Policy

Centre revises base year for CPI-IW to 2016

Our Bureau New Delhi | Updated on October 22, 2020 Published on October 22, 2020

Health, education, housing get more weight under new series

In the first revision in about two decades, the Centre on Thursday unveiled a new series of Consumer Price Index for Industrial Workers (CPI-IW) with 2016 as the base year.

The CPI-IW is prepared and made public by the Labour Bureau, under the Labour Ministry.

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The yearly inflation as represented by the All India CPI-IW has a key role in the calculation of dearness allowance (DA) and dearness relief (DR), besides basic wage. DA as a percentage of basic pay is paid to serving government employees, while DR as a percentage of basic pension is for retired employees. Amid the pandemic, the government had decided to freeze DA/DR at current rates till July next year. The current rate is 17 per cent of basic pay/basic pension.

The previous CPI-IW had a base year of 2001. Since the inception of the Labour Bureau, the series were revised from the year 1944 to 1949, 1949 to 1960, 1960 to 1982 and 1982 to 2001. The latest revision will take the current scenario closer to the base year and thus the rate of inflation will be more realistic.

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Labour data ‘crucial’

Commenting on the change after releasing the new series, Labour Minister Santosh Kumar Gangwar said data on all aspects of labour are crucial as inputs in policy making and this justifies the existence of an organisation like the Labour Bureau, dedicated to labour and price statistics. With the ever-increasing importance of data in the times to come, coupled with the fact that India is a labour-abundant nation, a dedicated organisation for labour and price statistics merits strengthening, he added.

Per the recommendations of the International Labour Organisation (ILO), the Index Review Committee (IRC) and the National Statistical Commission (NSC), the base year of price index numbers should be revised at frequent intervals — generally not exceeding 10 years — to reflect the changes in consumption patterns. The CPI-IW is compiled per international best practices and ILO guidelines.

Gangwar also released the maiden index with base year 2016 for September, which stands at 118.

Changes from old series

Among the changes in the new series, the sample size for the conduct of Working Class Family Income and Expenditure Survey, on the basis of which weighting diagrams are derived, has been increased to 48,384 families from 41,040 in the 2001 series. The number of selected markets for collection of retail price data has also been increased to 317, against 289 earlier.

The number of items directly retained in the index basket has increased to 463 from 392. The number of States/UTs has increased to 28, against 25 in the 2001 series.

The weight of Food & Beverages has declined over time whereas that of Miscellaneous (Health, Education & Recreation, Transport & Communication, Personal Care & Effects, Household Goods & Services, etc.) has increased substantially under the 2016 series. The weight of Housing has also gone up. The Group-wise Index for September varies from 113 points for Housing to 132 for the Pan, Supari, Tobacco & Intoxicants group.

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Published on October 22, 2020
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