Economic Updates: CPI-IW base year revised to 2016

Consumer Price Index for Industrial Workers

Approx Read Time: 3 minutes

Consumer Price Index for Industrial Workers

In News:

  • The Labour and Employment Ministry has revised the base year of the Consumer Price Index for Industrial Workers (CPI-IW) from 2001 to 2016, and made changes in the index to reflect the changing consumption patterns.  

News Summary:

  • The Labour and Employment Ministry has revised the base year of the Consumer Price Index for Industrial Workers (CPI-IW) from 2001 to 2016.
  • However, for now, the new series would not have an impact on the DA given to government employees for now.

Index synched to change in consumption patterns:

  • The new series also incorporates the changes in the consumption pattern of the working class families since the earlier base year of 2001.
  • The index will now give more weightage to spending on health, education, recreation and other miscellaneous expenses, while reducing the weight of food and beverages.
    • Under the new series, the weightage for the food group has gone down to 39.17% from 46.2% in the 2001 series.
    • The weight of miscellaneous items, like education and health, has risen to 30.31% from 23.26%. 
  • The centers and markets for collection of retail price data have also been increased to give a better picture.

Significance of CPI for Industrial Workers (CPI-IW):

  • The CPI-IW is mainly used for determining dearness allowance (DA) paid to central/state government employees and workers in the industrial sectors.
Note: Dearness Allowance (DA) is paid by the government to its employees as well as a pensioner to offset the impact of inflation.
  • CPI-IW is also used for fixation and revision of minimum wages in scheduled employments.

Index will be revised regularly going ahead:

  • As per the recommendations of relevant national and international agencies like the ILO and National Statistical Commission (NSC), the base year of price index numbers should be revised at frequent intervals.
  • The base year revision should not generally exceed 10 years to reflect the changes that take place in the consumption pattern of consumers.
  • Going ahead, the Labour Bureau said it would try to revise the index every five years.  

About: Consumer Price Index (CPI)

  • The Consumer Price Index is a comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy.
  • It is one of the most important statistics for an economy and is generally based on the weighted average of the prices of commodities and gives an idea of the cost of living.
  • The percentage change in this index over a period of time gives the amount of inflation over that specific period, i.e. the increase in prices of a representative basket of goods consumed.
  • Items covered: Food, beverages, tobacco, fuel & light, housing, clothing, bedding and footwear, and miscellaneous.
Categories of CPI:
  • At the national level, there are four Consumer Price Index (CPI) numbers. These are:
    • CPI for Industrial Workers (IW) – Base Year 2016 (after revision in October 2020)
    • CPI for Agricultural Labourers (AL) and CPI for Rural Labourers (RL) – Base Year 1986-87
    • CPI (Rural/Urban/combined) – Base Year 2012
Note: While the first three are compiled and released by the Labour Bureau in the Ministry of Labour, the fourth one is released by the NSO in the Ministry of Statistics and Programme Implementation (MoSPI).
  • The “retail inflation” we see often in the news refers to CPI (Combined) released by the NSO under MoSPI.

Also Read: Economy: Decoding GDP contraction

Like us on Facebook: UPSC Current Affairs

Learned Something??

Please rate this article..

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

Leave a Reply