New Series of Consumer Price Index Numbers for Industrial by yah17499

VIEWS: 95 PAGES: 9

									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.

								
To top