The labour office (Ministry of labour and employment) will unwind a new series of the Consumer Price Index for Industrial Workers (CPI-IW) on Wednesday October 21, for the calculation of the dearness allowance, on a new base year which will be updated from 2001 to 2016. It was made necessary by the evolution of the consumption habits, relative prices of various products and the spending patterns of the labour force in daily jobs. It will mainly report on the changing spending habits of the working class in the organized sector. CPI-IW is a new series of the industrial worker-based “consumer price index”, a measure of inflation used to calculate DA (dearness allowance) for government employees, industrial workers and dearness relief for pensioners.

The new index will give more weight to spending on services such as education, healthcare, housing, travel, and transportation, as spending in these areas seems to have gone up as compared to primary items such as food. This new CPI-IW would assist economists who calculate inflation, to reflect on a clearer picture of the costs of a working-class household. Presently, India has five consumer price indices (CPI_S) in which three are working as class-specific. These are CPI-IW for the industrial workers, CPI-AL (base year1986-87) for agricultural labourers, and CPI-RL (base year 1986-87) for rural labourers. There are also other indices like CPI-Urban and CPI-Rural. The complete rise in retail price is taken by CPI combined which uses both the CPI-Urban and CPI-Rural. The indices CPI-AL and CPI- RL are used to fix minimum wages of agricultural labourers and rural unskilled employees.

The CPI-IW has risen 5.6% in August as compared to 5.3% in July. It was observed that the current CPI-IW is outdated as an estimation of price rise for a basket of commonly consumed commodities.

Many experts say that it would be better if India had broadly two measures of retail inflation such as CPI Urban and CPI Rural. Various reports also suggested consolidation and updating of inflation indices. According to the economist R Gopalan, long term data analysis of retail inflation shows that the different inflation series are converging, leading to a case for consolidation. A Committee set up by the National statistical commission (NSC), an autonomous body that was set up in June 2005, under the recommendation of Dr C Rangarajan Commission, has also suggested that CPI-AL/RL and CPI-IW could be substituted with  CPI-Rural and CPI-Urban respectively.

The author is a student member of Amity Centre of Happiness.