Labour bureau to unveil new working-class inflation index


The labour bureau will release on Wednesday (October 21) a new series for consumer price index for industrial workers (CPI-IW), a measure of inflation used to calculate dearness allowance (DA) for government employees, wages for industrial workers and dearness relief for pensioners, an official said, requesting anonymity.

Here are five components of the story:

  • The new series will account for changing spending habits of the working class in the organised sector. The base year for calculating the CPI-IW will be updated from 2001 to 2016. It has also been necessitated by changing consumption habits, relative prices of various commodities and spending patterns of the country’s workforce in regular jobs.
  • The new index will assign more weight to spending on services such as education, healthcare, housing, travel and transportation, as spending on these items have gone up, as compared to primary items such as food. The index will help economists, who calculate inflation, to reflect a more accurate picture of a working-class household’s costs.
  • At present, India has five consumer price indices (CPIs), three of which are working-class specific. These are CPI-IW for industrial workers, CPI-AL (base 1986-87) for agricultural labour and CPI-RL (base 1986-87) for rural labour. There is also CPI-Urban and CPI Rural. The combined rise in retail prices is captured by CPI Combined. CPIs AL and RL are used to fix minimum wages of agricultural labourers and rural unskilled employees.
  • The CPI-IW rose 5.6% in August, as compared to a 5.3% uptick in July, according to latest available data. The Sixth Pay Commission for Central government employees, among many other reports, had found the current outdated CPI-IW to be a poor estimation of price rise for a basket of commonly consumed commodities.
  • A committee set up by the National Statistical Commission (NSC), an autonomous body that was set up in June 2005 under the recommendation of Dr C Rangarajan Commission, has suggested that CPI-Rural and CPI-Urban could be a substitute for CPI-AL/RL and CPI-IW, respectively.

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