Base-year change of CPI (IW) from 2001 to 2016 –Its Impact ? A writeup by Comrade D.Gopalakrishnan, VP, CHQ, AIBSNLPWA

 

Base-year change of CPI (IW) from 2001 to 2016 – Impact

 

Whether it was revised earlier

Yes.  After independence it was revised four times earlier (1949, 1960. 1982 & 2001)

 

What is the need for such revision

According to government sources, the revision is required because the consumption pattern is changing.  Chadha committee (headed by Prof. G.K.Chadaha) recommended for revision of base year once in 10 years.  Now the Govt. has announced that it will be revised once in 5 years hereafter.

 

Was there any consultation with workers’ representatives

·         Govt. appointed  a committee called “Technical Advisory Committee on Statistics of Prices & Cost of Living” with 21 members out of which only one was from Central TU (BMS).

·         Govt. also constituted “Standing Tripartite Committee” with 18 members out of which two were from Central TU (BMS & INTUC)

·         Change in base year has direct impact on DA & DR mainly on Central/State Govt. employees & pensioners who account for more than 5 crore and this section of stake-holders was not consulted

 

What is CPI (IW)

·         It is consumer Price Index for Industrial workers.  (Some other index is available for agricultural workers, rural workers, urban workers etc.)

·         It is one of the prominent economic indicators which measures the relative changes in retail prices for a fixed set of goods of services consumed by an average working class family

·         It is mainly used for determining DA to Central, State Government employees, Industrial workers and C.G. pensioners including BSNL/MTNL combined service optee pensioners which covers more than 5 crore

 

How CPI (IW) is determined

·         It is based on weighting diagaram which broadly consists of six items viz. 1) Food & Beverage 2) Pan 3) Fuel & Light 4) Housing 5) Clothing & footware 6) Miscellaneous (Each item will have sub-groups)

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·         Each item is given certain percentage and all put together would be 100 percent

·         Miscellaneous includes six items like 1) Education 2) Health-care 3) Recreation & Entertainment 4) Household good & services 5) Transport & Communication 6) Personal care & effect

 

Base year  Centres   Food  Pan  Fuel   Housing     Clothing        Misc   Total

                       Covered

1960              50               60.09 4.8   5.8      6.3               8.5               13.7    100

1982              70                57      3.15 6.28   8.67             8.54                        16.36   100

2001              78               46.2   2.27  6.43  15.27            6.57           23.26               100

2016              88             39.17   2.07  5.5     16.87           6.08           30.31               100

 

According to the above statistics in 15 years (between 2001 & 2016) food consumption has come down by 7.03%, Fuel by 0.93%, Clothing by 0.49%.  Does it reflect the  reality?      

 

·         Though number of families surveyed increased from 41040 to 48384 it is less than 1% of total working class families in the centres surveyed – Does it reflect the reality?

·         Asper the survey, one family member per day consumes less than 200ml of milk.  Is it the correct reflection?

·         Only consumption expenses are taken into account for weighting diagaram but non-consumption expenses like Incometax & other taxes, Repayment of loan & interest, Insurance premium etc. are not taken into account

·         The linking factor of 2016 series with 2001 is 2.88.  Asper 2001 base year, CPI (IW) was 338 in August 2020 and 340 in September 2020 which is 2% increase in one month.  Asper 2016 base year it is 117.4 and 118 respectively (an increase of 0.6 in one month).  This is the real impact. 

·         Retail inflation has pegged at 6.69% and food inflation at 9% in August 2020

·         It will have cascading effect on DA & DR

·         I presume that due to change in the base-year, DPE did not release the IDA increase from October 2020

 

 

 

 

 

Base-year change of CPI (IW) from 2001 to 2016 (Part II)

(D.Gopalakrishnan, CHQ vice-president, AIBSNLPWA)

 

How we are cheated?

Most of us are worried when there is a delay in releasing the DA/DR order by the Government. It is but natural.  But we do not understand that how we are cheated in compilation of figures.  The Government claims that 100% neutralization is given to price-rise by granting DA/DR.  But the fact is otherwise.  According to Department of Economic & Statistics (GoI), as on 1/4/2014 the price of rice per kg was Rs.52/- whereas the 7th CPC while compiling the cost for food stated the price of rice per kg as Rs.25.93 (nearly 50% less than the actual cost).  Similarly for housing, 7th CPC quoted only Rs.524.07.  Whether it is possible to get even a single room for rent with this amount?

 

Why the Govt. chose 2016 for base year change?

It is because “point to point rate of inflation” with base year as 2001 on an average for 11 months in 2016 was 5.21% (on 8th November 2016 PM announced demonetization and no percentage was given for the month of December 2016).  It was the lowest.  Between 2011 and 2015 the inflation rate ranged between 5.88% and 10.92%.

 

Inflation means what?

It means that the real value of money is reduced.  If you are able to purchase 3 kg of rice for 100 rupees last year, you can purchase only 2.5 kg this year for the same 100 rupees.

 

Groupwise change

Between 2001 & 2016 series out of six groups, points for food, pan, fuel, clothing was reduced but for housing and miscellaneous it was increased to keep the constant factor as 100.  Does it reflect the reality? No.

 

Level & pattern of consumer expenditure for 2009-2010 (as per NSS report No.538)

Food                                                              44.4%

Pan                                                                   1.5%

Fuel & Light                                                     6.9%

Clothing                                                            5.8%

Housing                                                            5.8%

Miscellaneous                                              35.6%

Total                                                                 100%

 

 

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National Statistical Office (NSO) conducted survey for 2017-2018 but the Govt. on 15/11/2019 withheld its release.  According to some reputed press media, 2017-18 survey revealed the fact that in real terms (after adjusting for

inflation), Monthly per capita expenditure (MPCE) dropped by 3.7% (in 2011-12 it was Rs.1501/- which came down to Rs.1446/- in 2017-18).  The Govt. also announced that it may conduct the survey in 2021 or 2022.  Then why can’t they wait till such time for base-year change?

 

How weighting diagram is derived?

It is on the basis of Working Class Family Income & Expenditure (WCFIE) survey i.e. the family budget covering consumption expenditure which is conducted by National Sample Survey Organisation (NSSO) under the Ministry of Statistics & Implementation.  Working class family means that in a family there should be a manual worker, working in any of the following 7 sectors viz. 1) factories 2) Mines 3) Plantation 4) Railway 5) Public Motor Transport 6) Electricity General & Distribution & 7) Port & Dock.

 

Weighting diagram is given on the basis of expenditure, the family incurs for each of the six categories.  The constant factor is 100 whether sample survey is conducted in 70 or 78 or 88 centres.    Prices of some items are collected on weekly basis, some items are on monthly basis.  Then these figures are distributed among various states & UT based on working class population. 

 

We should also understand that the ‘Worker/population ratio (WPR) in India was reduced by 3.9% between 2011-12 (38.6%) and 2017-18 (34.7%) according to 2017-18 Annual Report of Ministry of Statistics & Implementation.

 

Basket of Goods & Services/Markets/surveyed families

In 2001 series it contained 392 items.  In 2016, it is said to be 463 items.  Price is collected from 317 markets from 88 specified centres.  In Chennai, price collection was taken from shops from Ambattur, Perambur, Saidapet, Sembiam, Tiruvottiyur and Washermanpet.  In 2001 series there were 78 centres out of which 13 were dropped and 23 were added in 2016 series.  For example in Tamilnadu, Chennai, Coimbatore, Coonoor, Madurai and Salem were retained in 2016 series; but Trichy was removed and instead Tirunelveli & Virudhunagar were added.  According to statistics, there were 1,08,611 worker families in Virudhunagar but only 648 familes were surveyed which constitute 0.59%.  Totally for Tamilnadu from the above 7 centres sample survey was conducted from 3240 families.  

 

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No Survey

Before changing the base-year on earlier occasions, WCFIE (Working Class Family Income & Expenditure) survey was conducted.  When the base year was changed from 1949 to 1960, survey was conducted in 50 centres during

1958-59.  Similarly when the base-year was changed from 1960 to 1982 survey was conducted in 70 centres during 1981-82; for base-year change from 1982 to 2001, it was conducted in 78 centres during 1999-2000.  All these details are available in the official website of labour bureau and national statistical office.  But now when the base-year change is made from 2001 to 2016 there is no information available in the official website and we have to come to the conclusion that there was no survey.    

 

No Data for Linking Factor

Whenever there is a change in base-year, groupwise (for all the 6 groups) linking factor and General Index should be given.  It was done in 1982 and 2001.  General Index was 4.93 in 1982 and hence the linking factor was 4.93 and similarly in 2001 the general index was 4.63 and hence the linking factor was 4.63.  But no such information was given for the linking factor of 2.88 when the base-year is changed from 2001 to 2016.

 

No transparency

As a subscriber to the IMF’s Special Data Dissemination Standard (SDDS), India is obliged to follow good practices in 4 areas viz. Coverage, Periodicity and timeliness of Data, Public access to the data & Data integrity and quality. 

But this government is not following those good practices.  The present regime is not allowing its agencies to function as it was functioning. 

 

The Government has passed several laws regarding labour recently in the parliament.  But no consultations with labour representatives.  Usually Indian Labour Conference (ILC) is to be held every year.  In this ILC, representatives from the Government, employers’ organizations and employees organizations participate.  But since 2015 no ILC meeting was held.

 

Conclusion

The change in base year from 2001 to 2016 will have adverse effect on future DA/DR to employees & pensioners.  But some newspapers published that there will be increase in salary & DA for Govt. employees and pensioners.  Because of lack of knowledge some employees/pensioners were misguided by those reports.  It is our responsibility to educate them with facts. 

 

 

 

Change of Base year from 2001 to 2016 for CPI (IW)

 

The Government has announced the change of base year from 2001 to 2016 for compilation of CPI (IW) on 22/10/2020.

 

We urge upon the Government to review the decision because of the following reasons.

 

According to government sources, the revision is required because the consumption pattern is changing.  Chadha committee (headed by Prof. G.K.Chadha) recommended for revision of base year once in 10 years.  ILO guideline also recommends  for change once in 10 years.  But, now the Govt. has announced that it will be revised once in 5 years hereafter.

 

No proper consultation with stake-holders

·         Govt. appointed a committee called “Technical Advisory Committee on Statistics of Prices & Cost of Living” with 21 members out of which only one was from Central TU (BMS).

·         Govt. also constituted “Standing Tripartite Committee” with 18 members out of which two were from Central TU (BMS & INTUC)

·         Change in base year has direct impact on DA & DR mainly on Central/State Govt. employees & pensioners who account for nearly 5 crore and this section of stake-holders was not consulted.

Fallacy in compilation

·         It is one of the prominent economic indicators which measures the relative changes in retail prices for a fixed set of goods and services consumed by an average working class family

·         Though number of families surveyed increased from 41040 to 48384 it is less than 1% of total working class families in the centres surveyed.  It does not reflect the reality?

·         It is based on weighting diagaram which broadly consists of six items viz. 1) Food & Beverage 2) Pan 3) Fuel & Light 4) Housing 5) Clothing & footware 6) Miscellaneous (Each item will have sub-groups)

·         Food item is the main component among the six groups and whenever the base year is changed points towards food is getting reduced.  In this change it is reduced by 7.03 points compared to 2001 series whereas the points pertaining to miscellaneous is increased by 7.05 points.  According to government’s statistics in one year between August 2019 and August

 

 

 

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·         2020 price of food items was increased by 22 points whereas the miscellaneous items were increased by only 4 points.

·         Asper the survey, one family member per day consumes less than 200ml of milk.  Is it the correct reflection?

·         Only consumption expenses are taken into account for weighting diagaram but non-consumption expenses like Incometax & other taxes, Repayment of loan & interest, Insurance premium etc. are not taken into account

·         The linking factor of 2016 series with 2001 is 2.88 which is unrealistic.  When base year was changed from 1960 to 1982 (gap of 22 years) the linking factor was 4.93 and again when it was revised from 1982 to 2001 (gap of 19 years) the linking factor was 4.63. 

These unscientific changes shall have cascading effects in future on neutralization of price increase affecting the DA/DR granted to employees and pensioners.  It is requested to review and rescind the decision.  We also request that proper scientific method may please be adopted in consultation with real stake-holders like Central/State Government employees and pensioners and pensioners of PSU who are paid from Central Civil Estimate.

 

 

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