Context

The Union government revised the base year for computing Consumer Price Index (Industrial Workers) CPI-IW from the present 2001 to 2016 after a gap of 15 years.

About

What is CPI-IW?

• The CPI-IW is the single most important price statistics, which has financial implications.
• It is primarily used to regulate the dearness allowance of government employees and the workers in the industrial sectors.
• It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
• The CPI-IW is used primarily for measuring the Dearness Allowance (DA) payable to workers in the organised sector including PSUs, banks and insurance companies, besides government employees.
• It also provides inputs to government in macro policy planning. 
• It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

Who maintains Consumer Price Index in India? In India, there are four consumer price index numbers, which are calculated, and these are as follows: CPI for Industrial Workers (IW) CPI for Agricultural Labourers (AL) CPI for Rural Labourers (RL) CPI for Urban Non-Manual Employees (UNME) The Ministry of Statistics and Program Implementation collects CPI (UNME) data and compiles it. The remaining three (CPI-IW, CPI-AL, CPI-RL) are collected by the Labour Bureau in the Ministry of Labour.

The Base Year

• As per the norm, base year of price index numbers should be revised at frequent intervals generally not exceeding 10 years to reflect the changes that take place in the consumption pattern of consumers.
• Before the latest revision, the series was revised from 1944 to 1949; 1949 to 1960; 1960 to 1982 and 1982 to 2001.

The first Index for September (base year-2016) The Government also released the first index, with 2016 as the base year. The index for September, calculated for 88 centres as opposed to the previous 78 centres, was 118.  The sample size was increased from 41,040 families to 48,384, and the number of selected markets for collecting retail price data from 289 to 317.  The weight to food and beverage was reduced from 46.2% to 39%, while spending on housing increased from 15.2% to 17%.

Changes in the consumption pattern

• The new series also incorporates the changes in the consumption pattern of the working class families since the earlier base year of 2001.
• Under the new series,
  • the weightage for the food group has gone down to 39.17 per cent from 46.2 per cent in the 2001 series
  • The weight of miscellaneous items, like education and health has risen to 30.31 per cent from 23.26 per cent.
  • The weight of housing and clothing and footwear have changed to 16.87 per cent from 15.27 per cent and to 6.08 per cent from 6.57 per cent.
  • Weight of fuel and light segment will now have a weight of 5.5 per cent as against 6.43 per cent earlier
  • Pan, supari, tobacco and intoxicants will hold 2.07 per cent weight as against 2.27 per cent.