CPI (IW)

Consumer Price Index Number for Industrial Workers (Base: 2001=100)

Introduction:

The history of compilation & maintenance of Consumer Price Index Numbers for industrial Workers owes its origin to the deteriorating economic condition of the workers on account of abnormal rise in prices following the First World War. As a result of sharp rise in prices and the cost of living, some Provincial Governments started conducting Family Budget Enquiries and compilation of Consumer Price Index Numbers for Industrial Workers in the country. But none of them was entirely satisfactory. In pursuance of the recommendations made by the Rau Court of Enquiry, the job of compilation & maintenance of Consumer Price Index Numbers for Industrial Workers was taken over by the Central Govt. in 1941. However, the compilation of index numbers on uniform and scientific lines was started only after the conduct of the Family Living Surveys by the Labour Bureau during 1958-59 at 50 important industrial centres, spread over length and breadth of the country, under the guidance of the Technical Advisory Committee on Cost of Living Index Numbers and compilation of Consumer Price Index Numbers for Industrial Workers on base 1960=100. Since then the compilation and maintenance of Consumer Price Index Numbers are being done by the Labour Bureau on a continuous basis. The series (1982=100) had replaced the old (1960=100) series in December, 1988 with the release of October, 1988 index. The new series on base 2001=100 has been released on 9th March, 2006 with January, 2006 index which has replaced the earlier (1982=100) series.

Labour Bureau, is the competent authority under the Minimum Wages Act, 1948 to ascertain, from time to time, the Consumer Price Index Numbers applicable to employees employed in the Scheduled employments in respect of all the undertakings in the Central Sphere and the Union Territories (Notification No. LWI-24(3) dated 24th October, 1949).

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 subsequent series of Index Numbers on base 1982=100 and 2001=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 and distribution 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 current series of Consumer Price Index on base 2001=100 is compiled for 78 selected centres in the country. The All-India Consumer Price Index for Industrial Workers is the weighted average of these 78 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.

Weighting Diagram

The Centre-wise Weighting Diagrams for the Index have been derived from the results of Working Class Family Income and Expenditure Surveys conducted during 1999-2000 in all the 78 selected centres. The survey was conducted over a period of 12 months in each selected centre during 1999-2000, when an equal number of a moving sample of families was canvassed every month. The data collected through this survey was thoroughly scrutinised and inconsistencies, if any, were got rectified before getting it tabulated for the purpose of derivation of Weighting Diagrams. As it was not feasible to monitor the price behaviour of all the items on which index population reported consumption expenditure (nor it is necessary), only representative items were retained in the index basket, which were manageable over time.

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; and c) are priceable over the life of the series. The expenditure incurred on the items which are left out is imputed 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’.

Retail Prices:

The retail prices of the selected items are collected on the fixed date/day by part-time Price Collectors, who are generally the employees of the State Governments working either with the Directorate of Economics and Statistics or Labour Department. They are paid a small amount of honorarium as a token of appreciation for the work performed. The retail prices used in the index calculation are those actually charged to the consumer for cash transaction and are inclusive of all taxes which are payable by him. However, rebates and discounts given to consumers in general are taken into account. Thus, the retail price may be defined as money cost to the consumer of a specified unit of sale which is inclusive of all taxes but excludes all rebates, discounts, etc. The retail prices of price sensitive items such as cereals, pulses, vegetables & fruits, oils & fats, etc. are collected on a weekly basis. Similarly, the prices of some other items like cinema, furniture, utensils, clothing, house-hold appliances, etc., which are known to vary less frequently, are collected on monthly basis. However, the price data relating to house rent, school/college fees and books, etc. are collected on six-monthly/yearly basis as these items do not show much change in their price behaviour. While collecting prices, various elements such as fixity of markets, shops, specifications, unit of purchase, day and time of price quotations, etc. are maintained for the purpose of comparability.

Validation of Prices:

The present system of price collection passes through three tier scrutiny- at the first tier, the prices collected by the price collectors are scrutinized by the Price Supervisors who are middle level officers of the State Government working in same department - at the second stage prices are scrutinized by the Officers of the Regional Offices of the Labour Bureau and at the third tier they are scrutinized by the Officers at Head Quarter. These price data, after cleaning them for conceptual/factual errors at various levels, are utilised for the compilation of index numbers.

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 compiled for free, rented and owned 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 are collected by the field officials of Labour Bureau, twice a year from a sample of dwellings through a half 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 and Release of Index:

The index is compiled by using Laspeyre’s base weighted formula. 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 each centre is derived in several stages, i.e. sub-group, group and general (all combined). All-India index is a weighted average of 78 centre indices. 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. These indices are compiled on monthly basis with a time lag of one month and are released through Press Note, Monthly Index letter and Indian Labour Journal. Indices are also uploaded on the Bureau’s website labourbureau.gov.in.

Uses of CPI-IW:

1. The CPI (IW) indices are mainly used for regulation of Dearness allowance and Wages of millions of Workers and Employees belonging to Central Government, State Governments, Public and Private sector Establishments in the country.
2. CPI-IW serves as an indicator of retail price situation in the country. The rate of inflation based on retail prices is measured through these indices.
3. These are also used for real wage calculation i.e. as deflators of money wages.
4. These indices are used for determining the poverty line in the country.
5. These indices are also used for price adjustments in Business, Individual and Public Works contracts.
6. The interest rates charged by Banks and other financial institutions undergo changes on the basis of inflation rates depicted by these indices
7. These indices help in the formulation of General Economic Policy of the Government particularly with reference to wages, prices and taxation.

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CONSUMER PRICE INDEX NUMBERS FOR INDUSTRIAL WORKERS (CPI-IW) ON BASE 2016=100 [INCLUDING RETAIL PRICE INDICES]:

The Consumer Price Index Numbers for Industrial Workers are utilized for regulation of wages & dearness allowance for millions of workers & employees in the country. These indices are also used for measuring inflation and other policy formulations.

As an integral part, the Labour Bureau conducts Repeat House Rent Surveys in all the 88 selected centers with an objective to collect House Rent data from sampled dwellings on a regular basis for compilation of Housing Index in respect of these centers in each round of six months i.e., January to June and July to December.

The technical details of the surveys and compilation of Index Numbers has the approval of the Technical Advisory Committee on Statistics of Prices and Cost of Living, (TAC on SPCL).

On the basis of price data collected for compilation of Consumer Price Index Numbers for Industrial Workers on base 2016=100, Labour Bureau compiles monthly Retail Price Indices for 31 selected commodities in urban areas for 88 selected centers every month. These indices are supplied to Ministry of Consumer Affairs, Food & Public Distribution, Government of India every month for monitoring the prices of these commodities so as to take timely remedial action to check/regulate the prices of these essential items.