ANNUAL REPORT 2001
Methodology For Compilation of Consumer Price Index Numbers For Industrial Workers
(Base: 1982=100)
Scope
and Coverage
The
Consumer Price Index Numbers for Industrial Workers on base 1960=100 (old
series) was compiled for Industrial Workers relating to factories, mines
and plantations.But for the new
series of Index Numbers on base 1982=100, the coverage of the Industrial
Workers were increased to seven sectors viz. (a) factories, (b) mines,
(c) plantations, (d) railways, (e) public motor transport undertakings,
(f) electricity generation anddistribution
establishments, and (g) ports and docks. A Working Class Family is defined
as one where one of the members worked as manual worker in one of the 7
sectors as listed above and which derived one half or more of its income
through manual work.
The
Consumer Price Index is compiled for Industrial Workers residing in 70
selected centres in the country.The
All-India Consumer Price Index for Industrial Workers is based on these
70 centre indices.These centres
have been selected on the basis of industrial importance in the country
in the first instance and then distributed among different states in proportion
to the industrial employment in the state subject to maximum allotment
of 5 centres in a state to a sector.In
addition to these centres Labour Bureau on the request of the State Governments,
is also compiling Consumer Price Index Numbers in respect of 6 additional
centres viz. (i) Kothagudem, (ii) Goa, (iii) Himachal Pradesh , (iv) Chhindwara,
(v) Bhilwara &(vi) Tripura,
by up-dating their different base years to that of 1982=100.
Source
of Weights- Working Class Family Income and Expenditure Survey, 1981-82:
The
Weighting Diagram for the Index was derived by conducting Working Class
Family Income and Expenditure Survey, 1981-82 in all 76 selected centres.
A
‘Family Income & Expenditure Schedule’ was devised in which the information
was canvassed on family budget covering consumption expenditure over a
wide range of goods and services on which the selected families incurred
expenditure. Some related information was also canvassed in this schedule.
Simultaneously, another schedule on ‘House Rent’ was also canvassed which
formed the basis for six monthly repeat house rent surveys.
The
enquiry was conducted over the period of 12 months in each centreduring,
1981-82 when an equal number of a moving sample of families were canvassed
every month. The field work was carried out by the NationalSample
Survey Organisation(NSSO).
The data collected through this survey was tabulated for the purpose of derivation of Weighting Diagram and bringing out the analytical reports on the results of survey.
DERIVATION
OF WEIGHTING DIAGRAM:
i)
Item Weight:
Weights
are meant to indicate the importance attached to the different items ofgoods
and services, consumed by the worker in a given basket.It
is a common knowledge that people do not spend the same amount of money
on different items of consumption. It will, therefore, not be correct to
treat the percentage changes in the prices of all the items included in
the basket as of equal importance.Accordingly
each item in the index isgiven what
is called in technical language a “Weight” to represent the relative importance
of the price charged in a given pattern of consumption.As,
it is, not feasible to monitor the price behaviour of all the items on
which index population reported consumption expenditure (nor it is necessary)
a number of representative items are retained in the index basket which
are manageable over time. For this purpose the first step is to form a
group of items which meet similar or related demands of the consumers.
The
total expenditure on consumption of goods and services was divided into
the following groups/sub-groups:
I-
Food :
(a).Cereals
& Products
(b).Pulses
& Products
(c).Oils
& Fats
(d).Meat,
Fish & Eggs
(e).Milk
& Milk Products
(f).Condiments
& Spices
(g).Vegetables
& Fruits
(h).Other
Food
II-Pan,
Supari, Tobacco & Intoxicants;
III-Fuel
& Light :
IV-Housing;
V-Clothing,
Bedding & Footwear, and
VI-Miscellaneous
:
(a).Medical
Care & Effects
(b).Education,
Recreation & Amusement
(c).Transport
& Communication
(d).Personal
Care & Effects
The
items retained in the basket are those which a) account for substantial
fraction of expenditure in the Group/Sub-Group (generally one percent or
more); (b) represent the price trends of other items; andc)
are priceable over the life of the series. The expenditure incurred on
the items which are leftout isimputed
to the expenditure of the related items/sub-groups/group depending upon
their similarity of want, manufacturing process or price behaviour etc.
, as the case may be. The percentage expenditure on each item in the sub-group/group
represents its weight. Similarly, the percentage expenditure on sub-group/group
in the Group/Total consumption expenditure represent their weight. In this
process, the whole set of weights are derived, which is popularly known
as ‘Weighting Diagram’.
ii)
Centre Weight:
The centre weight is determined by taking product of average consumption
expenditure and number of families represented by a centre as a ratio of
sum of such products over all the centres. For this purpose each centre
is presumed to represent equal share of the working class families in a
state. However, if the actual number of families in a centre exceeds the
assumed share, its share is taken
as the actual number of families. For deriving thenumber
of families in a state, the average daily employment in respect of the
sectors covered for the survey is divided by the average number ofearners
in the state .
Item
Coverage :
The
coverage of items in the index basket is on the basis of the expenditure
incurred by the index population as reflected in the Working Class Family
Income & Expenditure Survey, conducted in the base year 1981-82.Once
the items for retention in the basket are determined on the basis of WCFI&ES,
representative items/varieties for the purpose of pricing are selected
on the basis of judgmental sampling, by conducting a market survey in each
of the centre.The varieties and
the specifications of the item are determined on the basis of consultation
with the representatives of the Trade Unions of Industrial Workers and
actual observations of popularity of the items in the selected shops of
the selected market.These items
are arranged in groups and sub-groups as indicated above for the purpose
of price collection and compilation of index numbers.
The ‘retail prices’ are another major component of Consumer Price index numbers. As the base year is generally one complete year of 12 months, the base year prices are taken as an average prices of 12 months of the year. The retail prices are those paid by the Consumer and include taxes paid by him. However, rebates and discounts, where allowed to consumers in general are taken into account. Thus, the transaction prices, i.e. actually paid by the consumer, of all the selected goods and services are collected for the compilation of index numbers. However, in case of few items which are supplied to the consumers through fair price shops, under the scheme of the Public Distribution System, the fair prices administered by the authorities are also collected for the purpose of arriving at weighted average prices of controlled and open market prices of these items.
Periodicity of Price Collection :
The
items covered in the basket are divided into three main categories for
the purpose of price collection depending upon the frequency of price collection
namely weekly, monthly and half-yearly :
i).The
prices of some items such as cereals, pulses, oils and fats, meat, fish,
condiments, vegetable etc. which are sensitive and change frequently, are
collected on weekly basis.
ii).Prices of items like cinema, furniture, utensils, clothing, house-hold appliances etc. are collected on monthly basis as their prices do not change very frequently.
iii).The
prices of items like house rent, school/college fees and books are collected
once in six months.
The prices of all the items retained in index basket are collected on a fixed price collection day every week/month by the part-time price collectors, who are officials of the State Governments working in Directorate of Economics & Statistics or Labour Departments. While collecting prices various elements like fixity of markets, shops, specifications, unit of purchase, day and time of price quotations etc. are maintained for the purpose of comparability.
The
prices, after receiving the same at Head-Quarter, are scrutinised and examined
for their correctness and veracity. The discrepancies, if any, are sorted
out in consultation with the price collectors/price supervisors through
correspondence, over telephone and/or price audit in markets by the staff
of the Bureau. Various special problems arising during the life of the
series with respect to prices or other specifications are sorted out by
undertaking small field surveys etc.
Pricing
of Housing and Housing Index:
Rent
is the only item which is priced for compiling housing index. Actual rents
of the rented houses, comparable rents for owner - occupied houses are
taken into consideration. For rent free houses, rent index is taken as
100. Thus, for compiling the housing group index, three separate indices
are compiledfor free, rented andowned
houses and these indices are combined by using their respective weights,
which are proportion of families residing in these three categories of
houses, to work out the weighted housing index. Housing group index is
compiled by following the Chain Base method, in which rent movements are
compared with the last six monthly period and not with the base period.Rental
data arecollected by the field officials
of Labour Bureau, twice a year from a sample of dwellings throughahalf
yearly House Rent Survey and rent index is calculated once in every six
months viz., Jan. and July and kept constant for the following five months.
Compilation
of Index:
The
index is compiled by using Laspeyres’ base weighted formula, which is given
below.
Where:
In the first stage price quotations of an item in all outlets of all the markets in a month are averaged for a centre. On the basis of this average centre price a price relative (over base period price) is worked out. However, in case of items which are supplied through subsidised outlets (fair price shop also) the procedure is slightly different. In their case first the weighted average price of open market and fair price outlets in each selected market of a centre is worked out (weights being availability ratio in the respective outlets in that month).In the next stage a simple average of these market prices is worked out to arrive at the centre price. The sub-group group Index is worked out as a weighted average of item/sub-group Index, respectively, the general index of a centre is worked out as weighted average of group indices.
Thus,
the index for eachcentre is derived
in several stages, i.e. sub-group, group and general (all combined)
An
All-India index isa weighted average
of 70 centresindices. These 70 centres
are allocated to different states on the basis of proportion of industrial
worker employment in them. The weight assigned to each centre is the proportion
of the estimated consumer expenditure of the centre to the aggregate consumer
expenditure of all the centres, as explained earlier.
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