New Series of Consumer Price Index Numbers for Industrial Workers* (Base: 2001 = 100) A Consumer Price Index (CPI) measures changes over time in the general level of prices of goods and services that a reference population acquire, use and pay for consumption. Among the CPIs in India, CPI- IW is one of the most important price indicators, used primarily to adjust for price rise by way of the dearness allowance of government employees and the workers in the industrial sector. Labour Bureau, has released in March 2006, the new series of Consumer Price Index Numbers for Industrial Workers (CPI-IW) with base 2001=100 with effect from January 2006. This article presents the important features of the new CPI-IW series vis-à-vis the earlier series with base 1982=100. The 2001 series covers 78 centres, 8 centres more than those covered under 1982 series. The sample size for the conduct of Working Class Family Income and Expenditure Survey, on the basis of which weighting diagrams have been derived, has been increased to 41040 families from 32616 families in the 1982 series. The number of selected markets for collection of retail price data has also been increased to 289 markets under the 2001 series as against 226 markets covered in the 1982 series. The number of items directly retained in the index basket has increased to 370 items as against 280 items in the 1982 series. The all India weighting diagram for different commodity groups have undergone significant changes between the two revisions. Major changes are observed in the Food Group, where the weight has declined to 46.2 per cent from 57.0 per cent making the index less sensitive to fluctuation in prices due to exogenous supply shocks. * Prepared by the Statistical Analysis Division, Department of Statistical Analysis and Computer Services. I. Introduction As per the framework laid down by the International Labour Organisation, a Consumer Price Index (CPI), in principle and in practice, should measure changes over time in the general level of prices of goods and services that a reference population acquire, use and pay for consumption. Among the CPIs in India, CPI- IW, which is one of the most important price indicators, is used primarily to adjust for price rise by way of the dearness allowance of government employees and the workers in the industrial sector. It is also used in fixation and revision of minimum wages in scheduled employments besides measuring the inflation in retail prices. Further, CPI-IW is used as a deflator for estimating GDP at constant prices of various segments like water supply, public administration and defence, education, medical and health services in public sector, etc., Labour Bureau has released, in March 2006, the new series of Consumer Price Index Numbers for Industrial Workers (CPI-IW) with base 2001=100 with effect from January 2006. This article presents the important features of the new CPI-IW series vis-à-vis the earlier series with base 1982=100. II. Developments The main objective of revision of the CPI-IW was to update the base year of the earlier series of CPI-IW (Base 1982=100) based on the latest consumption pattern of the working class population. The Technical Advisory Committee on Statistics of Prices and Cost of Living (TAC on SPCL) in its 34th meeting (held on 28th March 1988) entrusted a working group to give suggestions regarding the issues on the conduct of Family Income and Expenditure Survey with a view of updating the CPI-IW to a recent base. Based on the recommendations of the working group and subsequent approval of TAC, a comprehensive Working Class Family Income and Expenditure Survey was conducted in 78 selected centers by National Sample Survey Organisation with the help of Labour Bureau during September 1999 to August 2000, to decide the weighting diagram, item coverage, etc., for the new series. The survey covered families of workers residing in the 78 centres and having at least one member working in an establishment belonging to one of the seven sectors of employment, viz., Factories, Mines, Plantations, Ports & Docks, Public Sector Motor Transport Undertakings, Electricity Generation & Distributing establishments and Railways, and deriving 50 per cent or more of their income from any manual work during the calendar month preceding the date of enquiry. The sample selected from the 78 centres covered 55 per cent of the total all India employment of industrial workers in the above-mentioned seven sectors as against 47 per cent covered by 70 centres in the last survey. The number of centres allocated to each sector was distributed among State/Union Territories on the basis of industrial employment subject to maximum allotment of 5 centres per State in a sector. The actual selection of centres from a State in each sector was done in consultation with State government on the basis of industrial importance of the centre. Out of the 78 centers, 8 centers were allocated to Mining sector, 9 to Plantation sector and 61 to the rest of the 5 sectors. Of the selected centers, 64 centres were common to the existing series of All India Index; 5 out of 6 centres for which Labour Bureau has been maintaining a separate centre wise series were also included and 9 were new centres. The new series released now, thus includes 78 centres as against 70 centres in the old series (Base: 1982 =100). The list of 78 centres covered in new series as well as the centres dropped from the 1982 series is given in Annex 1. Before the launch of the main survey, pilot surveys were conducted at all the 78 centres to demarcate the centre-boundaries with a reference to market selection; selection of markets and shops; testing and finalisation of price collection schedule along with fixation of specifications of the items; setting up of price collection machinery in consultation with State Goverment by appointing Price Collectors/Supervisors and fixation of price collection day. The number of selected markets for collection of retail price data has increased to 289 markets as against 226 in the 1982 series. The broad sampling design adopted for the survey was a two stage stratified sampling with cluster of blocks or cluster of establishments as the first stage unit and a working class family as second stage unit. However, in the case of three sectors, viz., Electricity, Ports & Docks and Railways, a stratified unistage sampling was followed in certain centres where the number of establishments and/or number of workers belonging to that sector was small. The first stage units were taken with probability proportional to size with replacement, size being the number of workers and second stage units, i.e., working class families were selected systematically. Sampling was done independently for each sector in a centre. The working class families were approached by two methods, viz., Tenement Sampling and Payroll Sampling depending on the operational convenience. The center wise sample size was determined so as to provide sufficiently reliable estimates for the consumption pattern of each of the centers. Two schedules, family budget schedule (Schedule ‘A’) and house rent survey schedule (Schedule ‘B’) were used for conducting the survey. The number of families covered during the survey at each centre was determined by taking into consideration the variability in consumption pattern in a centre and the precision required in respect of the weights to be derived for use of compilation of CPI numbers. The minimum sample size for a centre was fixed at 216 for Schedule ‘A’ and 84 for Schedule ‘B’. In aggragate, 41040 families were covered in the new series as against 32616 in 1982 series. The data collected under the survey were tabulated and examined in detail by another subgroup of TAC constituted in the 41st meeting of TAC which, were duly approved by the TAC. The technical details pertaining to the updation of the CPI-IW (1982=100) to the base (2001=100) were further examined by a Sub-group of the TAC. Subsequently, recommendations of the SubGroup were placed before the TAC, for its consideration and approval in the 43rd meeting wherein the TAC finally accorded its approval to the methodology for compilation of indices under the CPI-IW (new series). III. Weighting Diagram The weighting diagram for the purpose of compilation of CPI-IW has been derived on the basis of average monthly family consumption expenditure. The consumption groups adopted for CPI-IW are as follows: IA - Food IB - Pan, Supari, Tobacco & Intoxicants II - Fuel and Light III - Housing IV - Clothing, Bedding and Footwear V - Miscellaneous. The food group is divided into 8 subgroups, viz., Cereals & Cereal Products, Pulses and Pulse Products, Oils and Fats, Meat, Fish and Eggs, Milk and Milk Products, Condiments & Spices, Vegetables & Fruits and Other Food. The miscellaneous group, which is used as a proxy for obtaining service price inflation, is divided into 5 subgroups, viz., Medical Care, Education, Recreation & Amusement, Transport & Communication, Personal Care & Effects and Others. The number of items directly retained in the index has increased to 370 items as against 280 items in 1982 series. The weighting diagram for 1982 series vis- à-vis the 2001 series is given at group level in Table 1. The all India weighting diagram for different commodity groups have undergone significant changes between the two revisions (Table 1). Major changes are observed in the Food Group, where the weight has declined to 46.2 per cent from 57.0 per cent. The fall in the weight in the Food Group supports the common view that an increase in the income level leads to a Table 1: Comparative Weighting Diagram at the Group level for the All India Index Sr. Group Base Base No. 1982 2001 1. Food 57.00 46.19 2. Pan, Supari, Tobacco and 3.15 2.27 Intoxicants 3. Fuel and Light 6.28 6.43 4. Housing 8.67 15.27 5. Clothing, Bedding and 8.54 6.58 Footwear 6. Miscellaneous 16.36 23.26 Grand Total 100.00 100.00 fall in the relative expenditure on essential commodities. In addition, the lower share of Food Group is expected to make the index less sensitive to fluctuation in prices due to exogenous supply shocks coming from below normal rainfall on agricultural production. In developed countries, the share of Food Group in consumer basket is generally less than 20 per cent. In sharp contrast, the weight for Housing Group has increased to 15.3 per cent from 8.7 per cent in accordance to the growing importance of real estate sector. The increase in weight for Miscellaneous Group from 16.4 per cent to 23.3 per cent was mainly on account to increased consumption expenditure on basic services like medical care, education, transport and communication, etc. The centre weights are determined as the ratio of product of average consumption expenditure per family and the number of Working Class Families in a centre to sum of such products over all the centres. Each centre is assumed to have an equal share of the number of working class families within the State. If the actual working class population for a particular centre exceeds the proportionate share accruing to the centre, the actual population of the centre is taken to determine its share and the remainder of the working class population in the State as a whole is distributed equally amongst remaining centres in the State. The center weight in All India new series (2001=100) vis-à-vis old series (1982=100) is given in Annex 2. Among the centers, weights of 28 have increased, while 40 centers have witnessed a fall in their weight and in the remaining centers there was no change in their weights. Significant changes are noted in the weights of Bangalore (-1.32 per cent), Mumbai (1.70 per cent), Chennai (-1.16 per cent), Kolkata (-2.73 per cent), Delhi (0.20 per cent) and Vadodara (1.12 per cent). IV. Price Data The retail prices are collected on a weekly/monthly basis by the Price Collectors through personal visits to the selected/reserve shops in the markets on the appointed price collection day every week/month. Prices for each commodity are collected from two selected shops for each of the selected markets. The weekly/ monthly quotations are first averaged at market level for a month after removing the discrepancies and by pooling the market averages, the central average price for an item for a month is arrived at. The change in rent and related charges, which constitute a single item under housing group, is captured through Repeat House Rent Surveys, which are conducted in the form of six-monthly rounds. The survey is conducted on a sub-sample of dwellings covered during the main income & expenditure survey in 1999- 2000. The index for the housing group is revised twice a year, i.e., in January and July of every year and is kept constant for the entire six months, as similar practice followed in the earlier series also. V. Base Year and Compilation of Index Calendar year 2001 has been taken as the common base for all the centres under the new series. Apart from the reliability of price data and also going by the broad economic indicators, selection of calendar year 2001 as the base year seemed justified, as the overall price behaviour across the country was more or less normal. The most preferred index formula used for compilation is the Laspeyres’ base weighted formula, first at the sub group level, then at the group level and finally at the aggregate level. Centre specific indices in respect of all the 78 centres are compiled by utilizing the expenditure on an item in the base period and the ratio of current period price to base period price of an item. The All India Index is the weighted average of the 78 centre level indices. th In the 45 meeting, the TAC on SPCL accorded the approval for the release of the new series of CPI-IW with base 2001=100. Accordingly, with the approval of Govt. of India, the Labour Bureau released the new series of the CPI-IW with base 2001=100 with effect from January 2006. The group-wise CPI-IW of new series from January to September 2006 is given in Annex 3. VI. Linking Factor The monthly indices for the 12-month period, January 2004 to December 2004, were calculated on the old base (1982=100) as well as on the new base (2001=100). The linking factor is then obtained by taking the average of the ratios of these old index values to the new index values. Accordingly the linking factor for conversion of new All India Index to previous series with base 1982=100 is worked out to be 4.63. The linking factors for various centres as well as the subgroups are also arrived in the similar manner. A comparison of CPI-IW inflation based on new series (Base: 2001) vis-à-vis the earlier series (Base: 1982) from January 2003 to December 2004 reveals that the both the rates were in almost close agreement till May 2004. From June 2004 onwards there is a divergence between the two sets of values, which almost converged in December 2004 (Chart I). The difference between the two series may be attributed to the changing contribution of food articles to total CPI inflation. References Government of India, Ministry of Labour, Labour Bureau: Report of the Sub-Group of the TAC on SPCL for updating the base of the existing series of CPI (IW) (1982=100) to the new base (2001=100), 2005. Government of India, Ministry of Labour: Indian Labour Journal, Issues April 2005 –October 2006. Government of India, Ministry of Labour, Labour Bureau: Reports On Working Class Family Income & Expenditure Survey, 1999-2000, Base 2001=100. Government of India, Ministry of Labour, Labour Bureau http://labourbureau.nic.in Annex 1 A. List of Centres under Consumer price Index for Industrial workers (2001=100) Andhra Pradesh Jharkhand Rajasthan 1. Godavarikhani* 24. Bokaro* 52. Ajmer 2. Guntur 25. Giridih* 53. Bhilwara 3. Hyderabad 26. Jamshedpur 54. Jaipur 4. Vijayawada* 27. Jharia Tamil Nadu 5. Vishakhapatanam 28. Kodarma 55. Chennai 6. Warrangal 29. Ranchi Hatia 56. Coimbatore Assam Karnataka 57. Coonoor 7. Doom Dooma- 30. Bangalore 58. Madurai Tinsukia 8. Guwahati 31. Belgaum 59. Salem 9. Labac- Silchar 32. Hubli Dharwar 60. Tiruchirapally 10. Mariani-Jorhat 33. Mercarra Tripura 11. Rangapara- Tezpur 34. Mysore* 61. Tipura Bihar Kerala Uttar Pradesh 12. Monghyr- Jamalpur 35. Ernakulam/Aluva 62. Lucknow* 36. Mundakayam Chattisgarh 63. Agra 37. Quilon 13. Bhilai 64. Ghaziabad Goa 65. Kanpur Madhya Pradesh 14. Goa 66. Varanasi 38. Bhopal Gujarat 39. Chhindwara West Bengal 15. Ahmedabad 40. Indore 67. Asansol 16. Bhavnagar 41. Jabalpur 68. Darjeeling 17. Rajkot 69. Durgapur Maharashtra 18. Surat 70. Haldia 42. Mumbai 19. Vadodara 71. Howrah 43. Nagpur 72. Jalpaiguri Haryana 44. Nasik 73. Kolkata 20. Faridabad 45. Pune 74. Raniganj 21. Yamunanagar 46. Sholapur 75. Siliguri* Himachal Pradesh Orissa Chandigarh 22. Himachal Pradesh 47. Rourkela 76. Chandigarh 48. Angul-Talchar* Jammu and Kasmir Delhi 23. Srinagar Punjab 77. Delhi 49. Jalandhar* 50. Amritsar Pondicherry 51. Ludhiana 78. Pondicherry B. Centres dropped from 1982 Series 1. Gudur (Tamilnadu) 4. Barbil (Orrisa) 2. Noamudi 5. Saharanpur (U.P) (Bihar/Jarkhand) 3. Trivandrum (Kerala) 6. Balaghat (M.P) * New Centres. Annex 2 Weightage of Centres in All India New Series (2001=100) vis-à-vis Old Series (1982=100) No. Centre Weight Weight No. Centre Weight Weight in All India in All India in All India in All Index Index Index India 2001=100 1982=100 2001=100 Index 1982=100 1 Godavarikhani 1.17 NC 40 Indore 1.05 1.28 2 Guntur 0.81 1.11 41 Jabalpur 1.55 1.32 3 Hyderabad 1.51 1.63 42 Chandigarh 0.16 0.16 4 Vijayawada 1.18 NC 43 Delhi 1.99 1.79 5 Vishakhapatana 1.98 1.93 44 Mumbai 9.57 7.87 m 6 Warrangal 0.98 1.54 45 Nagpur 1.06 1.56 7 Doom Dooma- 0.44 0.57 46 Nasik 1.50 2.04 Tinsukia 8 Guwahati 0.50 0.66 47 Pune 1.81 1.94 9 Labac- Silchar 0.33 0.44 48 Sholapur 0.95 1.24 10 Mariani-Jorhat 0.46 0.51 49 Rourkela 0.71 1.67 11 Rangapara- 0.46 0.63 50 Angul-Talchar 0.88 NC Tezpur 12 Monghyr- 1.06 1.1 51 Pondicherry 0.59 0.25 Jamalpur 13 Bhilai 0.97 1.91 52 Jalandhar 0.96 NC 14 Goa 0.36 AC 53 Amritsar 1.07 1.86 15 Ahmedabad 1.37 2.74 54 Ludhiana 0.57 1.17 16 Bhavnagar 1.66 0.99 55 Ajmer 1.56 1.59 17 Rajkot 1.81 1.17 56 Bhilwara 0.73 AC 18 Surat 1.18 0.86 57 Jaipur 1.09 1.25 19 Vadodara 2.00 0.88 58 Chennai 2.31 3.47 20 Himachal 0.57 AC 59 Coimbatore 1.26 1.89 Pradesh 21 Faridabad 1.34 1.17 60 Coonoor 1.18 1.54 22 Yamunanagar 1.67 1.05 61 Madurai 1.17 1.51 23 Srinagar 0.45 0.22 62 Salem 1.12 1.16 24 Bokaro 0.91 NC 63 Tiruchirapally 1.37 1.35 25 Giridih 0.55 NC 64 Tripura 0.26 AC 26 Jamshedpur 1.02 1.63 65 Lucknow 2.75 NC 27 Jharia 0.84 2.39 66 Agra 1.91 1.09 28 Kodarma 0.43 0.59 67 Ghaziabad 1.82 1.27 29 Ranchi Hatia 0.71 1.35 68 Kanpur 2.09 1.30 30 Bangalore 1.95 3.27 69 Varanasi 2.64 1.42 31 Belgaum 0.96 1.33 70 Asansol 1.08 1.00 32 Hubli Dharwar 1.18 1.29 71 Darjeeling 0.53 0.59 33 Mercarra 0.63 1.16 72 Durgapur 1.14 0.98 34 Mysore 0.92 NC 73 Haldia 1.74 0.83 35 Ernakulam/Aluv 3.08 1.58 74 Howrah 0.79 1.78 a 36 Mundakayam 1.83 1.01 75 Jalpaiguri 0.48 0.94 37 Quilon 1.75 0.58 76 Kolkata 1.51 4.24 38 Bhopal 1.35 1.51 77 Raniganj 0.99 1.31 39 Chhindwara 1.21 AC 78 Siliguri 0.48 NC NC: New Centre. AC: Additional Center not covered in All India Index. Annex 3 CPI-IW for January - September 2006 Item Weight Jan Feb Mar Apr May Jun Jul Aug Sep All 100.0 119 119 119 120 121 123 124 124 125 Food Group 46.19 116 115 115 117 120 123 123 125 Pan. Supari, Tobacoo & 2.27 112 113 114 114 114 115 115 116 Intoxicants Fuel & Light 6.43 125 126 126 126 128 129 129 130 Housing 15.27 123 123 123 123 123 123 126 126 Clothing, Bedding & 6.58 111 112 112 113 113 113 113 113 Footwear Miscellaneous Group 23.26 122 123 123 123 124 124 125 126 Source: Indian Labour Journal, Labour Bureau, GOI.
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